Balance per Cash Book and Bank Statement Causes, Examples

book balance vs bank balance

In this blog, we will introduce you to some real-life bank reconciliation examples as well as the major roadblocks faced by organizations while reconciling their bank statements. The Ending Balance is from your bank statement, whereas Beginning Balance is from your register. The latter is from the last reconciled transaction law firm bookkeeping in your register, as shown in the screenshot. Bank errors are mistakes made by the bank while creating the bank statement. Common errors include entering an incorrect amount or omitting an amount from the bank statement. Compare the cash account’s general ledger to the bank statement to spot the errors.

You receive a bank statement, typically at the end of each month, from the bank. The statement itemizes the cash and other deposits made into the checking account of the business. The statement also includes bank charges such as for account servicing fees. This process of adjusting the book balance to match the bank balance is known as bank reconciliation.

What is the Book Balance?

The term book balance, which is also used in the bank reconciliation is the amount shown in the company’s general ledger for the bank account. Say for your May 31 bank reconciliation, you show an ending balance of $5,500 in your cash account as of May 31, but your bank balance per the statement is $6,000. In such a case, if a customer deposits cash into the depositor’s bank account directly, disagreement between two balances remains till it is recorded in the depositor’s ledger account.

As a result, the interest earned would not be reflected in the book balance until the interest has been credited and the bank account reconciliation has been performed. Ensuring an accurate book balance can help companies manage the monthly cash flow activities, which includes cash coming in and cash being paid out from the company. As CEO and Co-Founder, Mike leads FloQast’s corporate vision, strategy and execution.

Example #2: Cash Book Balance More Than Bank

If, on the other hand, you use cash basis accounting, then you record every transaction at the same time the bank does; there should be no discrepancy between your balance sheet and your bank statement. If you do your bookkeeping yourself, you should be prepared to reconcile your bank statements at regular intervals (more on that below). If you work with a bookkeeper or online bookkeeping service, they’ll handle it for you. Effective bank reconciliation process offers various advantages to businesses.

At the end of each month, the cash book is not balanced until a bank statement is received from the bank. Suppose that at the end of May, according to your company’s ledger (your “books”), your company has a balance of $10,000 in its bank account. Other errors can include withdrawals or deposits not noted in your company’s books and bank errors. While performing a bank reconciliation, you note that your general ledger balance is $6,000 while the bank’s monthly statement shows a balance of $5,990.


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