Reasons for Difference Between Bank Statement and Company’s Accounting Record
When banks send companies a bank statement that contains the company’s beginning cash balance, transactions during the period, and ending cash balance, almost always, the bank’s ending cash balance and the company’s ending cash balance will never be the same. Some reasons for the difference are:
Deposits in transit: Cash and checks that have been received and recorded but have not yet been recorded on the bank statement.
Outstanding checks: Checks that have been issued by the company to creditors but the payments have not yet been processed.
Bank service fees: Banks deduct charges for services they provide to customers but these amounts are usually not noticeable.
Interest income: Banks pay interest on some bank accounts.
Not sufficient funds (NSF) checks: When a customer deposits a check into an account but the account of the issuer of the check has insufficient amount to pay the check, the bank reduces from the customer’s account the check that was previously credited. The check is then returned to the depositor as an NSF check.
Nowadays, many companies use specialized accounting software in bank reconciliation to reduce the amount of work and adjustments required and allow real-time updates.