Checking Account

A checking account simplifies the reconciliation of the general account by avoiding a large number of relatively small outstanding checks. It also simplifies recordkeeping because a separate cash disbursements journal can be maintained for each account. When it is necessary for a company to write a large number of checks for a specific purpose, it … Read more

Treatment of Unpresented Checks in Bank Reconciliation Statement

What Are Unpresented or Outstanding Checks? An unpresented check (or outstanding check) is a check that has been issued or drawn by the depositor but not presented to the bank for payment until the date that the bank statement is issued. Effect of Unpresented Checks on Bank Balance When a check is issued to a … Read more

Petty Cash

Petty Cash: Definition A petty cash fund is established by transferring a specified amount of cash from the general checking account to a person who is given custodial responsibility for the fund. Petty Cash: Explanation In most companies, there are many occasions when a small amount of cash must be spent at short notice. Generally, … Read more

Treatment of Uncleared Checks in Bank Reconciliation Statement

What Are Uncleared, Uncollected, Uncredited Checks? A check that a customer has deposited but that the bank has not yet credited or collected in the customer’s account by the date on which the bank statement is issued is known as an uncleared check. Effect of Uncleared Check on Bank Balance Whenever a check is received … Read more

Depreciable Basis

Depreciable Basis: Definition Depreciable basis is the asset acquisition cost less its estimated residual value. Depreciable Basis: Explanation The total amount of depreciation that should be recorded in an asset’s life is called its depreciable basis. The amount is the difference between the value of the asset at the beginning of its life (cost) and its … Read more

Restricted Cash

Generally Accepted Accounting Principles (GAAP) call for the presentation of information about restricted cash balance. These restrictions may include amounts set aside in escrow accounts, which can be used only for a specified purpose. These amounts should be excluded from cash and from current assets if appropriate. There may be informal restricted cash arising from … Read more

Treatment of Errors and Omissions When Preparing Bank Reconciliation Statement

Errors and Omissions In some cases, discrepancies in the cash book and bank statement may arise from errors committed by the bank or by the person responsible for writing up the cash book. These errors have to be properly rectified. This article shows several examples of such errors and omissions. 1. Errors Resulting in More … Read more

Unrecorded Transactions Treatment in Bank Reconciliation Statement

Unrecorded Transactions Depositors (customers) and banks sometimes do not align when a transaction takes place, which leads to a difference between the balances of their respective books. The bank records these transactions in the bank statement but does not alert the depositor, who may only find out when they receive the bank statement. The following … Read more

Straight-Line Method of Assets Depreciation

What Is the Straight-Line Method? Straight-line depreciation is the simplest of the various depreciation methods. Under this method, yearly depreciation is calculated by dividing an asset’s depreciable cost by its estimated useful life. By a large margin, the most easily understandable and widely-used depreciation method is the straight-line method. In this approach, an equal amount … Read more

Cash Equivalents

When reporting on cash equivalents, accountants must consider: Measurement of income Disclosure of the amount on the balance sheet date The carrying value is the original amount invested plus accrued income. Depending on the amount of detail needed or desired for a financial report, highly liquid savings accounts or money market fund holdings can be … Read more