What would cause a bank statement not to agree with the cash balance?

To help reduce financial errors and prevent fraud, many businesses perform a monthly bank reconciliation, comparing the business’s bank account statement to the company’s general ledger. Understanding why these two documents might not match up will help you find common problems quicker or avoid making mistakes in the first place.

Math Errors

1. One of the most common reasons a bank reconciliation doesn’t come out right is because of math errors. This can happen in one of two ways. You might make an error when you’re recording a transaction in your general ledger. This can be as simple as transposing two numbers or recording a transaction twice, or be more serious, such as forgetting a transaction. The other way math errors occur is when both the ledger and bank statement match, but you make a mistake during your comparisons. If your initial check of your statement and general ledger finds the documents in agreement, it’s always a good idea to run the numbers twice in case you made a math error that coincidentally shows them matching.

Outstanding Checks

1. Another reason bank statements and general ledgers may not agree is because a payment recorded in the general ledger might have been a check that did not clear your bank until after your statement closing date. For example, if you pay a vendor $105.08 on March 15 and the vendor does not cash the check until March 30, your bank account probably won’t be debited $105.08 in March. Your ledger will have the $105.08 payment debit recorded in March, however. If you find your numbers are off by $105.08, you might quickly find a $105.08 transaction in your ledger, but not on your bank statement. For this reason, it’s common practice to record how transactions are paid in your general ledger. If your ledger designates a transaction as one you paid with a check, look at the bank statement section that shows which checks cleared to confirm the situation.

Electronic Fees

1. With more and more businesses using electronic transactions, the different fees charged can cause confusion. You might take a credit card payment for $250 and record that as a $250 credit in your ledger. However, when you get your bank statement, you might find your credit card processor has taken a percentage of that $250, depending on your arrangement, and deposited less than $250 into your account. You also might have monthly shopping cart, secure gateway and card processing fees, one or more of which differ each month. If you earn interest on your bank account balance, you probably won’t know the exact amount until you receive your monthly statement.

Potential Fraud

1. Another reason a bank reconciliation statement might show a difference is because someone has stolen from you. A person making general ledger entries might record cash transactions in your general ledger, but not deposit the money. This might be a one-time event, or occur on a daily or weekly basis, with the person recording the fraudulent entries planning on leaving your company just before the bank statement arrives. To protect yourself from fraud, check your bank balance electronically on a regular basis, ideally daily.

Recommended textbook solutions

Intermediate Accounting

14th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

1,471 solutions

Essentials of Investments

9th EditionAlan J. Marcus, Alex Kane, Zvi Bodie

689 solutions

Fundamentals of Financial Management

14th EditionEugene F. Brigham, Joel F Houston

845 solutions

Financial Accounting

13th EditionCarl S Warren, James M Reeve, Jonathan E. Duchac

290 solutions

Recommended textbook solutions

Intermediate Accounting

14th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

1,471 solutions

Century 21 Accounting: General Journal

11th EditionClaudia Bienias Gilbertson, Debra Gentene, Mark W Lehman

1,009 solutions

Intermediate Accounting

10th EditionDavid Spiceland, Mark W. Nelson, Wayne Thomas

2,204 solutions

Intermediate Accounting, Volume 1

13th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

1,519 solutions

What would cause a bank statement not to agree with the cash balance in the accounting records ?\?

What would cause the balance of cash in the bank statement not to equal the balance of cash in the accounting records?

What are the common causes of discrepancy in cash balances?

Why bank statement does not match the bank account?