Question

Describe the process of entering a correcting entry then explain the general principles for reconciling balances outstanding and how would you enter something from the statement that decreases the bank balance.

Answer 1

There are two process to make correct entries:

First: reverse the incorrect entry and after that make a correct second journal entry in order to record the correct transaction or

Second: make a single journal entry that fixes the eroor when combined with the original entry and incorrect entry.

In order to renconcile the outstanding balances:

• we need to verify the entries made in our bank book in order to check whether they match with the entries appears in the month-end bank statement because as many times check issued by us and recorded in our bank book does not get cleared from our bank account as a deduction from cash.
• A listing of uncleared checks and uncleared deposits will appear in our bank reconciliation software module
• Enter as expenses all bank charges appearing on the bank statement in our records which have not already been recorded
• keep all the uncleared checks listing in your accounting software, so they will be an ongoing reconciling item.

If there is any error made by the bank in recording a correct amount, entering an amount that does not belong to our bank statement, or omitting an amount from our bank statement. We should notify these errors to our bank. Therefore, depending on the error, the correction could decrease the balance shown on the bank statement