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What is the purpose of journal entries on bank reconciliation?
For adjusting entries we pass the journal entries in BR, eg:- Bank service charge for maintaining the account, check printing charges, fees for returned checks, and interest earned.
Journal entries are required for the items listed as adjustments to the balance per books on the bank reconciliation. These adjustments involve items that appear on the bank statement that were not recorded in the company's general ledger accounts. Typical adjustments include the bank service charge for maintaining the account, check printing charges, fees for returned checks, and interest earned.The journal entries for the bank fees would debit Bank Service Charges (or Miscellaneous Expense if the amounts are insignificant) and a credit to Cash. The journal entry for a customer's check that was returned due to insufficient funds will debit Accounts Receivable and will credit Cash. Interest earned by the company will be recorded with a debit to Cash and a credit to Interest Revenue (or Interest Income).
Normally, when there are reconciling items.
We use jounral entires to bring our cash balance as per our cash book and as per our pass book to the same position. There are many scenarios to this. A simple example for this is bank charges debited in pass book alone. Inorder to bring the cash book balance to the pass book balance we pass a journal entry to record this bank charge and bring out cash book balance down.
just to write down adjustments in ledgers
We using journal entries to fulfill the matching principles for two ledgers like Cash Book & Bank Book. That's happens at the month end mostly when we need monthly reporting for management & settlement of clients/vendors balances. Thanks
We use journal entries on the following adjustments in relation to bank reconciliation as follows :-
1) Bank charges including yearly annual fees
2) Stamp duty and cheque book charges
3) Cheques cancelled or unpresented cheques for more than 6 months
4) Interest income earned on bank balances
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