USA adjusting entries

[diegolaw]

I'm trying to do a bank reconciliation, this account haven't been reconciled since 11/2010.
My bank statement beginning balance on 12/2010 is off by $6814.00, I'm trying to do an adjusting entry but I can not correct the balance yet, can anybody help me? any suggestion?
Thanks.

 

[kirby]

First off - be sure to fully verify that last 11/2010 recon. If it is incorrect it will become a bad starting point that will misguide you. So "audit" it 100% until you are sure it is correct.

Next, let's get terms straight - you said that "the bank statement beginning balance is off" - can't be. Balance per bank is now cast in stone ( look at bank agreement which says you have about 1 month to find and report an error in bank statement to the bank for correction - after that time - cast in stone. That 1 month was a looong time ago...
So what I'm saying is difference is in BOOK number now - not in BANK number.
So now to correct:

Let's say BANK statement says you have $5 and BOOKS (GL acct) says you have $6,819 - a difference of $6,814 (could be the other way around but go with example for now) So since in this example - BANK is LESS than BOOK your entry is

DR LOSS P&L ACCT $6,814
CR ASSET ACCT (representing bank acct) $6,814

 

[8MinuteCPE]

I agree with kirby, you should "rollforward" the account until today. There may be a timing difference in the book figures, that will resolve itself as you reconcile.

You might also want to look at the list of outstanding transactions - make sure that there aren't duplicates or items missing.

It may be worthwhile, depending upon the size of the company, to investigate further back. Irregularities in a bank reconciliation can sometimes be an indicator of inappropriate activity.