Bank recon unmatched items


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In an accounting IT system, if you have unpreseneted cheques GL and the bank recons are done automatically through bank statements uploads, where are transactions that are not in the GL but appear in the bank statement likely to be posted?
 
J

John Baker

(1) File updates and programing could be neglecting a cutoff cycle.
(2) Postings could be to another account(s) in error.
(3) Manual petty cash records could be neglected.

On the other hand, if you're dealing with a small business, a family owned business and the like.
What you're looking for could be in the owner's pocket, in the glove compartment of their car, or
simply sitting on someone's desk.*

*
By the way, this is not a sarcastic post, nor does it contain any humor. Sometimes, this is a never ending problem
with some people that are just forgetful.
 
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Thankyou for your reply.

I thought this might have been the case, but I wanted a second professional opinion.

We suspect its the cut off dates being 31st December 2018 and these cheques being presented on the system in Jan 2019. The actual presentation to the bank was in 2018 though. Would the trial balance as at Dec 2018 still balance? It does in this case and eliminating other mispostings, we can't seem to figure out where these amounts maybe posted in the 2018 period.

Its a utilities company with liability clearing accounts for every bank account and an un presented cheques GL as well which makes things easier.

I would appreciate your feedback at your earliest convenience. Thank you in advance!
 
J

John Baker

Basically, you're dealing with "checks outstand", and accounted for internally by you.
With respect to your trail balance, yes it will balance because all your internal entries deal with your internal
accounting, not the bank/clearing house, etc.
As far as presenting checks in another accounting period, and included -or - cleared by the bank, and stated in your bank's closing balance, remember that you're dealing with two different points in time.
What might be confusing to you is the time lag between presentation, clearing, and statement presentation that you're trying to reconcile. These time lags are not that difficult to account for, if you keep it simple and define your reconciliation schedule reconciles - first portion reconciles to the cash account, the second portion reconciles to the statement. When you see mismatches, then and there is your point of reasoning and fact-finding.
I'm not familiar with " utilities company with liability clearing accounts", so my suggestions are limited, I know.
However, what's a little confusing is:
...these cheques being presented on the system in Jan 2019. The actual presentation to the bank was in 2018 though.
Could you explain the presentation part on what system, compared to actual presentation?
 
J

John Baker

Basically, you're dealing with "checks outstand", and accounted for internally by you.
With respect to your trail balance, yes it will balance because all your internal entries deal with your internal
accounting, not the bank.
As far as presenting checks in another accounting period, and included -or - cleared by the bank, and stated in your bank's closing balance, remember that you're dealing with two different points in time.
What might be confusing to you is the time lag between presentation, clearing, and statement presentation that you're trying to reconcile. These time lags are not that difficult to account for, if you keep it simple and define your reconciliation schedule reconciles - first portion reconciles to the cash account, the second portion reconciles to the bank statement. When you see mismatches, then and there is your point of reasoning and fact-finding.
I'm not familiar with " utilities company with liability clearing accounts", so my suggestions are limited, I know.
However, what's a little confusing is:
...these cheques being presented on the system in Jan 2019. The actual presentation to the bank was in 2018 though.
Could you expand your comments related to what system?
 
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Basically, you're dealing with "checks outstand", and accounted for internally by you.
With respect to your trail balance, yes it will balance because all your internal entries deal with your internal
accounting, not the bank/clearing house, etc.
As far as presenting checks in another accounting period, and included -or - cleared by the bank, and stated in your bank's closing balance, remember that you're dealing with two different points in time.
What might be confusing to you is the time lag between presentation, clearing, and statement presentation that you're trying to reconcile. These time lags are not that difficult to account for, if you keep it simple and define your reconciliation schedule reconciles - first portion reconciles to the cash account, the second portion reconciles to the statement. When you see mismatches, then and there is your point of reasoning and fact-finding.
I'm not familiar with " utilities company with liability clearing accounts", so my suggestions are limited, I know.
However, what's a little confusing is:
...these cheques being presented on the system in Jan 2019. The actual presentation to the bank was in 2018 though.
Could you explain the presentation part on what system, compared to actual presentation?
Thanks again and my apologies for the ambiguity.

To be more clear, the GLs are what i earlier referred to as the system.

The cheques were written and presented to the bank prior to anything being passed through the GLs. These were then picked up from the bank statement durring an automated bank recon process and showed on a balancing report as a reconciling item titled "unprocessed transactions - cheques not in CRs".

The transactions were then processed through the GLs in 2019 but back dated to 2018 while cheque presentation dates for these remained in the 2019/01 period.

We are now over stating our liabilities (un presented cheques) which shouldnt be the case but I'm not sure of where this should be posted on the TB for 2018. There are only 6 cheques written and presented in 2018 that I am trying to match in the right period (2018).

How or what enteries would you suggest to correct this timing issue so we are correctly reporting our liabilities at year end?

Once again thank you!
 
J

John Baker

I'm going to address your question(s) from a control point of view, which has the process of closing the door on a lot of problems.
The issues that I see are: (if I'm misreading something, please advise me)
The cheques were written and presented to the bank prior to anything being passed through the GLs.
If this is a common practice within your enterprise, it leaves the check and balances process out of the audit trail. In fact, the room
for creative thinking is not good way, and just begs for all kinds of ramifications. In fact, if your staff has had internal audits, I'm
positive that this has been one of many forms of administration that's been noted. ( again, if I'm reading your comments correctly, and there's nothing left out of the physical administration.)

But, when reconciling cash to an outside record keeping system, like a bank, of course you're going to be off, because:
…. The transactions were then processed through the GLs in 2019 but back dated to 2018...
When doing a bank reconciliation schedule, this schedule is only used as an information schedule, not a source for a journal entry.
So if I'm reading your remarks, as stated, you could be double posting because:
…... We are now over stating our liabilities (un presented cheques) which shouldn't be the case...
Again, I'm not familiar with the utilities industry and the regulations that may be impacting your accounting.

Perhaps someone else can chime in and help you better than I can. It's difficult to read-in to the systems of checks and balances,
bookkeeping and procedures, when not actually there to be at ground level. I only wish I could be of more help,
 
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Thank you once again!

I believe it is an accounting software programming error. I will dwell deeper into it with the software company and get back to you.

I appreciate your professional and timely feedback.
 

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