A.  Basic Bank Services
Bank accounts permit depositing money for safeguarding and helps control withdrawals.

B.   Electronic Funds Transfer (EFT)
Electronic communication transfer of cash from one party to another.

C.     Bank Statement
Shows activities of a bank account and is used to prove the accuracy of the depositor's cash records by preparing a bank reconciliation.

1.   Bank reconciliation –a report that explains (reconciles) the difference between the balance of a checking account according to the depositor's records and the balance reported on the bank statement.

2.   Factors causing the bank statement balance to differ from the depositor's book balance are:

a.   Outstanding checks.

b.   Deposits in transit.

c.   Deductions for uncollectible items and services

d.   Additions for collections and interest.

e.   Errors.

3.   Steps in preparing the bank reconciliation:

a.   Identify the bank balance of the cash account (balance per bank).

b.   Identify and list any unrecorded deposits and any bank errors understating the bank balance. Add them to the bank balance.

c.   Identify and list any outstanding checks and any bank errors overstating the bank balance. Deduct them from the bank balance.

d.   Compute the adjusted bank balance, also called corrected or reconciled balance.

e.   Identify the company's balance of the cash account (balance per book).

f.    Identify and list any unrecorded credit memoranda from the bank, interest earned, and errors under­stating the book balance. Add them to the book balance.

g.   Identify and list any unrecorded debit memoranda from the bank, service charges, and errors over­stating the book balance. Deduct them from the book balance.

h.   Compute the adjusted book balance, also called corrected or reconciled balance.

i.    Verify the two adjusted balances from steps d and h are equal. If yes, they are reconciled. If not, check for accuracy and missing data to achieve reconciliation.

4.   Adjusting entries from a bank reconciliation

a.   All reconciling additions to book balance are debits to cash. Credit depends on reason for addition (Examples: Credit Interest Income for interest on balance and Notes Receivable when bank collected note).

b.   All reconciling subtractions from book balance are credits to cash. Debit depends on reason for subtraction. (Examples: Debit Miscellaneous Expense for bank service charge and Accounts Receivable/customer for NSF checks.).