Occasionally, journal entries impacting cash are completely missed and these are caught during the bank reconciliation process.
Example
ABC Clothing has a general ledger cash balance of 2,000,000 RWF. The bank statement reflects a balance of 1,750,000 RWF.
Upon comparison of the general ledger and the bank statement, the accountant notices that a payment to a supplier of 250,000 RWF was never recorded in the general ledger.
Another type of error is an outright omission – somehow the transaction was not recorded at all.
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 – Supplies expense 250,000
Credit – Bank account RWF 250,000
Qs: What is the journal entry?
Qs: Why do we credit the bank account?