WHAT ARE THE PRINCIPLES , CONCEPTS OR THEORIES IN BANK RECONCILIATION

CONCEPTS./ PROCEDURES:

Almost all businesses, self employed individuals or even company employed individual  makes use of a BANKING INSTITUTION  to  deposit their cash collections and to withdraw  cash  to the bank where they have opened a bank account.

There are  possibly two types of bank accounts that can be opened:
          1.  the SAVINGS ACCOUNT DEPOSIT  =  this is where you can deposits all of your collections whether in the form of  cash or in the form of CHECKS from your clients, your own checks or any check for that matter for as long as you are the payee.
                   A passbook is issued to you by the bank , WHERE YOU  SAVINGS ACCOUNT NUMBER IS WRITTEN,  and where it would show the individual  DEPOSIT SLIPS  you make and the individual withdrawal you make on the basis the WITHDRAWAL SLIPS slips ( NOT THRU A PREPARED CHECK )  you have prepared and the finally the BALANCE OF CASH DEPOSIT.  TAKE note that the deposit slips and withdrawal are not pre numbered.
                   In opening of your savings account , you will be given a SIGNATURES CARD for you to have your signature be written for purposes of verifying the signatures appearing on the withdrawal slip is genuine or not.
                   In this type of deposit, basically you can withdraw by way of  preparing a WITHDRAWAL SLIPS  or any other form as designated by the bank.  The issuance of your check is not basically allowed to be withdrawn from this savings account .
                  However, in a much bigger companies, there arrangement to the bank as far as this SAVINGS ACCOUNT is concern is to use this account for purposes of depositing their collection only, NO WITHDRAWAL  is allowed , but, based on arrangement with the bank, there will be an AUTOMATIC CASH TRANSFER OF  DEPOSIT  to  another type of deposit  with the same bank  called , CURRENT OR CHECKING ACCOUNT deposit  which was also opened to that bank.
this is normally called  ONE WAY DEPOSIT ARRANGEMENT . 
               
                This savings deposit  generally entitled to earn interest and is normally credited to the your savings account.

         2.   THE CURRENT OR CHECKING ACCOUNT DEPOSIT TYPE  -  This type of deposit allows you also to make a deposit similar with the saving account, however,  a withdrawal slips cannot be used to withdrawal from this account.  When you opened a CHECKING  account, the bank will give you your checking account number and a   check booklet containing many individual pages of checks. You will also be requested to write your signature in a SIGNATURES CARD implying that you are the authorized check signatory for that account. 
                 The following are the information or the contents of that  piece of check"

                      a.  on the upper right side is the date
                      b. on the upper top is your CHECKING ACCOUNT NO.
                      c.  the check number of that  check itself
                      d.  the name of your company or even your name
                       e.  a space provided where the name of the payee will be written
                       f.  a space for the amount of check to be written
                      g. the  blank space where the signature of the authorized signatories are to be placed.

There is a possibility that a company may not anymore issue a CHECK , instead  they have an arrangement with the bank that whenever the company wants to pay a certain companys , individual  HAVING ALSO THEIR BANK SAME BANK WITH YOU  , they will just prepare a  list of the name of the payees and their account number maintain in that same bank and debit to your account is made.

Every end of the month, the month your bank will give you a copy of your bank statement  that would show the following infomation

  SAVINGS ACCOUNT :

           DATE           POSTING REFERENCE                  DEPOSIT    WITHDRAWAL    BALANCE


          JAN 3               DEPOSIT SLIPS                              100                                          100
           JAN 9                         WSLIPS                                                            4                    96
        JAN 12                RETURNED CHECK                                                4                      92 
        JAN   30             INTEREST                                          3                                              95
        jAN  30             TRANSFERS                                                              93                        2
             JAN 30        BANK CHARGES                                                       1                           1
        JAN 30           PROCEEDS OF LOAN                       30                                                31


YOUR CHECKING ACCOUNT APPEARS LIKE THIS :

        DATE                    REFERENCE                            DEPOSIT        WITHDRAW       BALANCE
     BEG BALANCE                                                                                                               399
          JAN 3                DEPOSITS  SLIPS                       400  
JAN  5                      CHECK NO.33O3O                                                    30
         8                        CHECK NO.33035                                                     20         
         20               TRANSFER FROM                               93                                                 842

 ======================================================================


WE GO  NOW DIRECTLY HOW YOUR OWN  CASH BALANCES IN YOUR LEDGERS  INTERACTS WITH THE  BANK LEDGER OR BANK STATEMENT.

PROCEDURE IN DEPOSITING COLLECTIONS TO THE BANK

1. WHEN THE COMPANY COLLECTS MONEY, CASH OR CHECKS ,IT IS OR IT MUST BE COVERED BY AN OFFICIAL RECEIPT  ISSUED BY THE  YOUR COMPANY THAT WOULD SHOW THE NAME  FROM WHOM IT WAS RECEIVED.
2. THOSE  OFFICIAL RECEIPTS DURING THE DAYS ARE SUMMARIZED AN AN ENTRY IS MADE  DEBITING CASH ON HAND OR CASH IN BANK, THAT GOES TO THE DEBIT SIDE OF YOUR CASH IN BANK ACCOUNT OF THAT BANK IN YOUR SUBSIDIARY LEDGER..
3.  AS A GENERAL RULE,  ALL COLLECTIONS SHOULD BE DEPOSITED TO THE BANK THE FOLLOWING DAY.  HOWEVER THAT  COLLECTIONS ARE RECORDED  IN YOUR CASH LEDGER ACCOUNT DURING THE DAY.  THAT MEANS YOUR CASH IN BANK DEBIT DURING THE DAY MUST EQUAL TO THE BANK DEPOSIT SIDE OF THE BANK STATEMENT.
4.     ALL YOUR COLLECTIONS DURING THE DAY IS COVERED BY A DEPOSIT SLIPS OF THAT BANK , OR OF OTHER  DIFFERENT BANK WHERE THE COMPANY HAS  A  BANK ACCOUNT.
5.    THAT MEANS YOUR DEPOSIT SLIPS DURING THE DAY  SHOULD BE EQUAL TO WAS DEBITED TO YOUR CASH IN BANK ACCOUNT OF THAT PARTICULAR BANK WHERE THE DEPOSIT WAS MADE.   TAKE NOTE THAT IF THERE ARE SEVERAL BANK ACCOUNTS, THERE WILL BE MANY  CASH IN BANK SUBSIDIARY LEDGER ACCOUNTS FOR EVERY BANK IN YOUR SUBSIDIARY LEDGERS.

WHAT ARE THE POSSIBLE DIFFERENCES OF YOUR CASH IN BANK  ACCOUNT  DEBIT SIDE OF YOUR LEDGER  VERSUS THE BANK DEPOSIT ENTRIES IN THE BANK STATEMENT OF THE BANK  REPRESENTING DEPOSITS

   WHAT ARE THE COLUMNAR HEADING OF YOUR CASH IN BANK - SAVINGS ACCOUNT IN YOUR LEDGERS.

                                                                ACCOUNT NAME   CASH IN BANK-savings 
                                                               SUBSIDIARY NAME;  SECURITY BANK

DATE                                                               DEBIT                     CREDIT             BALANCE

XXXXX                                                       XXXXXXXXXX         XXXXXXX         XXXXXXX

WHAT WOULD APPEAR ON THE DEBIT SIDE.

1.   On this debit side all your collections  made shall appear on the debit side,  even the interest earned by your savings as informed you by your bank thru a credit memo, shall be entered in the debit side.
2.   if you obtain  a loan especially on this bank shall also appear on the debit side after you have received a copy of that credit memo for that loan..
3.  on the debit side , it may also include a previously  wrong credit entry made  that was later on debit for the correction of that wrong entry.

WHAT WOULD APPEAR ON THE CREDIT SIDE.

1.  if the company has an automatic transfer agreement, using the transfer note from the bank, saying that they have transferred  this amount from the SAVINGS   ACCOUNT TO THE CURRENT OR CHECKING ACCOUNT ,   a corresponding entry has to made by the company to CREDIT CASH IN BANK SAVINGS AND DEBIT CASH IN BANK CURRENT. ACCOUNT.

2.   If and when a previously deposit check has bounced and it was not redeposited since it was returned to the owner of the check  for him to replace it.  A  ENTRY HAS TO BE MADE  CREDITING CASH IN BANKS SAVINGS ACCOUNT.