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Betty’s Bakery
Small Business Manual Accounting & Bookkeeping Practice Set
The Bank Reconciliation Overview
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The Bank Reconciliation form is located in Step 5: Workpapers (5.5). A bank reconciliation is the process that compares the bank statement balance to the company's General Ledger bank account balance and summarizes the missing transactions for both The purpose of a bank reconciliation is to identify any discrepancies or differences between the two balances and to adjust the accounting records accordingly.
Work to be Performed
To prepare the bank reconciliation you need the bank statement, the GL checking account, any journals that have cash transactions, and a bank reconciliation form The bank reconciliation form is located in Section 5 Workpapers (5.5). Remove it from the manual and become familiar with the format and information to be entered.
1. Enter the month-end General Ledger Checking Account balance and the month-end Bank Statement balance in the applicable two columns on the first line at the top.
2. Enter checkmarks next to each cash transaction in the four journals that also appear on the bank statement. Also, checkmark the bank statement amount that it matches the GL
3. Enter any unchecked cash receipt amounts in the journals as additions to the bank balance in the Deposits in Transit section. Enter any unchecked cash payment amounts in the journals as deductions from the bank balance in the Outstanding Checks section.
4. Verify any bank fees and/or interest earnings have been recorded in the General Journal.
5. The reconciliation is complete when the two column totals at the bottom are in agreement.
The Balance Sheet Overview
The Balance Sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time, usually at the end of a month, quarter, or year. The primary purpose of a business is to grow the organization and increase owner’s equity by generating operating profits.
The Balance Sheet answers two foundational and fundamental questions: (1) what is the value of the business (total assets)? and (2) who has rights or owns the assets (creditors vs owners)? It is a key financial statement in assessing financial liquidity, leverage, and strength of a company.
A balance sheet is based on the accounting equation: Assets = Liabilities + Equity whereby the total assets of a company must equal the sum of its liabilities and equity. The income and expense accounts are sub-sets of the owner’s equity as explained in more detail below.
