BANK RECONCILIATION STATEMENT

DEFINITION;

A form that allows individuals to compare their personal bank account records

to the bank's records of the individual's account balance in order to

 uncover any possible discrepancies.

BANK RECONCILIATION PROCESS; 

Step 1. Adjusting the Balance per Bank
We will demonstrate the bank reconciliation process in several steps. The first step is to adjust the balance on the bank statement to the true, adjusted, or corrected balance.

1;Deposits in transit
Deposit in transit are amounts already received and recorded by the company, but are not yet recorded by the bank

2;Outstanding checks
Outstanding checksare checks that have been written and recorded in the company's Cash account, but have not yet cleared the bank account.

3;Bank errors
 Bank errors are mistakes made by the bank. Bank errors could include the bank recording an incorrect amount, entering an amount that does not belong on a company's bank statement, or omitting an amount from a company's bank statement.

Step 2. Adjusting the Balance per Books
The second step of the bank reconciliation is to adjust the balance in the company's Cash account so that it is the true, adjusted, or corrected balance..

1;Bank service charges
Bank services charges are fees deducted from the bank statement for the bank's processing of the checking account activity .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. The company's Cash account will need to be decreased by the amount of the service charges

2;Not Sufficient Fund Check  
Nsf 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. As a result, the check is returned without being honored or paid.

3;Notes Receivable
Notes recivable are assets of a company. When notes come due, the company might ask its bank to collect the notes receivable. For this service the bank will charge a fee.

4;Interest earned
 intrest earned will appear on the bank statement when a bank gives a company interest on its account balances. The amount is added to the checking account balance and is automatically on the bank statement. Hence there is no need to adjust the balance per the bank statement. However, the amount of interest earned will increase the balance in the company's Cash account on its books.

5;BookErrors
Book error in the company's Cash account result from the company entering an incorrect amount, entering a transaction that does not belong in the account,

Step 3. Comparing the Adjusted Balances
After adjusting the balance per bank (Step 1) and after adjusting the balance per books (Step 2), the two adjusted amounts should be equal. If they are not equal, you must repeat the process until the balances are identical. The balances should be the true, correct amount of cash as of the date of the bank reconciliation

Step 4. Preparing Journal Entries
 Journal entries must be prepared for the adjustments to the balance per books (Step 2). Adjustments to increase the cash balance will require a journal entry that debits Cash and credits another account. Adjustments to decrease the cash balance will require a credit to Cash and a debit to another account.

 

IAS 2 INVENTORIES

OBJECTIVE
IAS 2 prescribes the accounting treatment for inventories.  
In summary, IAS 2 says the following:
Inventory shall be valued at the LOWER of:
 Cost                            or          Net realisable value
Cost
IAS 2 states that ‘cost’ should comprise:
• the cost of purchase;
• the costs of conversion; and
• other costs.
‘Other costs’ should only be recognised as those costs that have been incurred in bringing the
inventories to their present location and condition.
Valuation
IAS 2 prescribes two possible valuation methods for inventories.  An entity can adopt either:
• the first-in first-out basis (FIFO); or
• a weighted average basis.
Entities are not permitted to use a last-in first-out (LIFO) basis of valuation.
Net Realisable Value
Net realisable value is the estimated selling price in the ordinary course of business, less the
estimate costs of completion and the estimated costs necessary to make the sale.

CLOSING ENTRIES

A closing entry are made at the end of accounting period.the closing entry are used transfer data in the temporary accounts to the permanent balance sheet or incom statement accounts.the purpose of closing entry is to bring the temporary journal account balances zero forthe next accountig period which aids in keeping the accounts reconciled.


FORE TYPES OF CLOSING ENTIES;

1; To close revenue accounts;
                    
   revenue account    
                     incom summary account
    close revenu account to incom summary account by debiting revenu account and crediting incom summary account

2;To close expenses accounts

incom summary account
                   expenses accont
close expenses account to incom summary account by debiting incom summary account and creditng expenses account  all expenses are idvidually closed.

3;To close income summary account

  income summary account
                  retained earning account
close income summary account to retained earning account if retained earning debit in case of loss and if retained earnind credit in case of profit

4;To close divident account;

retained earning account
                 divident account
closing divident to retained earning account by debiting retained earning account and crediting divident account and divident is contra retained earning

CLOSING ENTRIES

ACCOUNTING CYCLE

1; COLLECT DATA FROM TRANSACTION; 

First of all we collect data from transaction and  after the
analyize data.

2;JOURNALIZE TRANSACTION;

After collecting the data of transaction the 2nd step is put the transaction
 into journal form

3;POST TO JENERAL LEDGER;

After pas the journal entries the entries posted into
ledger account

4; PREPARE UNADJUSTED TRIAL BALANCE;

At the end of period double entry accounting requaired debited and credits
 recorded in the jeneral ledger be equal

5.PREPARE ADJUSTED TRIAL BALANCE

after that adjusted trial balance is prepared in which all the transactions remained left are recorded

6.PREPARE FINANCIAL STATEMENTS

To prepare finacial staements at the end of the accounting period is the primary function of every organisation that includes balance sheet and income statment

7.CLOSING THE ACCOUNTS

After that the revenue and expenses accounts are closed and the balances of assets liabilities and owners equity is forward to the next period