Most companies use checking accounts to handle their cash transactions. The company deposits its cash receipts in a bank checking account and writes checks to pay its bills. Keep in mind, a bank account is an asset to the company BUT to the bank your account is a liability because the bank owes the money in your bank account to you. For this reason, in your bank account, deposits are credits (remember, liabilities increase with a credit) and checks and other reductions are debits (liabilities decrease with a debit). Adjust the balance on the bank statements to the corrected balance.
To detect bank errors
Section A is where you calculate what your bank account balance from your own financial database. Section B is where you list the differences between the transactions appearing on your bank statement and the transactions appearing on your cash journals. Incorrectly recording transactions in the accounting system can result in errors in the balance sheet and bank statement, making it challenging to reconcile. They are helpful when reconciling accounts to print statements, clearing errors, etc. They can also be helpful when reconciling accounts for pulling reports.Another example would be where you deposit cash, but the teller doesn’t post it correctly.
