Bank and Book Reconciliation Items

1. Book Reconciliation Items

These are items that appear on the bank statement but have not yet been recorded in the company’s books. They generally require adjustments to be made in the company’s records.

Examples of Book Reconciliation Items:

• Credit Memos: Amounts credited to your account by the bank that you haven’t recorded yet (e.g., interest earned, refunds).
• Debit Memos: Amounts debited from your account by the bank that you haven’t recorded yet (e.g., bank fees, direct debits, loan payments).
• NSF (Non-Sufficient Funds) Checks: Checks that you deposited but were returned by the bank due to insufficient funds. You likely recorded the deposit, but you now need to reverse it.
• Bank Charges/Fees: Automatic deductions from the bank (e.g., service fees, overdraft charges) that the company hasn’t recorded yet.
• Interest Earned: Interest credited by the bank to your account that needs to be recorded.

Action Required: Adjust the company’s cashbook or ledger to reflect these transactions and ensure the balances align.

2. Bank Reconciliation Items

These are items that have been recorded in the company’s books but have not yet been processed by the bank. These are generally timing differences that will eventually clear in future bank statements and don't require adjustments in the company’s records.

Examples of Bank Reconciliation Items:

• Outstanding Checks: Checks that the company has issued and recorded but have not yet been presented to the bank for payment.
• Deposits in Transit: Deposits that the company has recorded but have not yet been credited by the bank.
• Bank Errors: Errors made by the bank that affect the statement balance but will eventually be corrected (e.g., wrong amounts credited/debited).

Action Required: No immediate action is required in the company’s books, but you’ll monitor these items until they clear in the bank’s records.

How These Items Fit in the Reconciliation Process:

Item Type	Category	Explanation	Action Needed
Credit Memo	Book reconciliation item	Bank has credited the account (e.g., interest, refunds) but the company hasn’t recorded it yet.	Record the increase in the company’s books.
Debit Memo	Book reconciliation item	Bank has debited the account (e.g., bank fees, direct debits) but the company hasn’t recorded it yet.	Record the deduction in the company’s books.
NSF Check	Book reconciliation item	A deposited check was returned unpaid due to non-sufficient funds.	Reverse the deposit and record any NSF fees.
Bank Charges/Fees	Book reconciliation item	Bank charges or fees that the bank has deducted, but the company hasn’t recorded yet.	Record the deduction in the company’s books.
Interest Earned	Book reconciliation item	Interest earned on the bank account that the company hasn’t recorded yet.	Record the interest income in the company’s books.
Outstanding Checks	Bank reconciliation item	Checks issued but not yet presented to the bank.	No action needed (wait for these to clear).
Deposits in Transit	Bank reconciliation item	Deposits recorded in the books but not yet processed by the bank.	No action needed (wait for these to clear).
Bank Errors	Bank reconciliation item	Errors made by the bank that affect the bank statement balance.	Monitor the bank for corrections.

Summary

• Book Reconciliation Items (e.g., credit memos, debit memos, NSF checks) represent transactions that the bank has already recorded but the company has not. These require adjustments in the company’s records.
• Bank Reconciliation Items (e.g., outstanding checks, deposits in transit) represent timing differences, where the company has already recorded the transaction, but the bank has not. These typically do not require adjustments, as they will clear in future bank statements.