Occasionally, journal entries impacting cash are incorrectly recorded and these are caught during the bank reconciliation process.
Example
ABC Clothing has a general ledger cash balance of 1,050,000 RWF. The bank statement reflects a balance of 1,500,000 RWF.
Upon comparison of the general ledger and the bank statement, the accountant notices that a deposit of 500,000 RWF made in the middle of the month was incorrectly recorded in the general ledger as a deposit of 50,000 RWF.
We’ve looked at the key the typical adjustments required because they are not captured in the normal receipts/disbursements processes.
Let’s move on to errors – mistakes that were made in the normal day-to-day
Do we need to record a journal entry?
Qs: Why do we adjust the ledger as opposed to the bank?
-We need to adjust the ledger because the bank has the correct amount – a mistake was made in the ledger
Qs: Do we need a journal entry?
-Yes, we need to correct the error
Debit – Bank account RWF 450,000
Credit – Sales or AR 450,000
Why do we debit the bank account?
Qs: What is the journal entry?
Qs: Why do we debit the bank account?