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Therefore, they need to be listed on the bank reconciliation as an increase to the balance per bank in order to report the true amount of cash.Outstanding checks are checks that have been written and recorded in the company's Cash account, but have not yet cleared the bank account.The company's Cash account will need to be decreased by the amount of the service charges.An NSF check is a check that was not honored by the bank of the person or company writing the check because that account did not have a sufficient balance.The bank might deduct these charges or fees on the bank statement without notifying the company.When that occurs the company usually learns of the amounts only after receiving its bank statement.The first step is to adjust the balance on the bank statement to the true, adjusted, or corrected balance.
This process of confirming the amounts is referred to as reconciling the bank statement, bank statement reconciliation, bank reconciliation, or doing a "bank rec." The benefit of reconciling the bank statement is knowing that the amount of Cash reported by the company (company's books) is consistent with the amount of cash shown in the bank's records.A company's general ledger account Cash contains a record of the transactions (checks written, receipts from customers, etc.) that involve its checking account.The bank also creates a record of the company's checking account when it processes the company's checks, deposits, service charges, and other items.Because the bank service charges have already been deducted on the bank statement, there is no adjustment to the balance per bank.However, the service charges will have to be entered as an adjustment to the company's books.