Reconciling the Bank Account

Reconciling the Bank Account - Reconciling the Bank Account...

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Reconciling the Bank Account Because the bank and the company maintain independent records of the company's checking account, you might assume that the respective balances will always agree. In fact, the two balances are seldom the same at any given time. Therefore it is necessary to make the balance per books agree with the balance per bank—a process called reconciling the bank account . The lack of agreement between the balances has two causes: 1. Time lags that prevent one of the parties from recording the period. 2. Errors by either party in recording transactions. Time lags occur frequently. For example, several days may elapse between the time a company pays by check and the date the bank pays the check. Similarly, when a company uses the bank's night depository to make its deposits, there will be a difference of one day between the time the company records the receipts and the time the bank does so. A time lag also occurs whenever the bank mails a debit or credit memorandum to the company. The incidence of errors depends on the effectiveness of the internal controls maintained
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This note was uploaded on 11/06/2011 for the course ACCOUNTING ac 201 taught by Professor - during the Spring '11 term at Montgomery.

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Reconciling the Bank Account - Reconciling the Bank Account...

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