Software: MoneyWorks accounting software
Received your bank statement for the month of January 2012, it shows a closing balance of $100,500.00. You discovered that you had accidentally recorded a payment transaction, rental expense for the amount of $2,568.00, for the month of January into the month of February. This cheque was wrongly posted in MoneyWorks in the month of February but presented in your bank in the month of January
If you were to enter your closing balance for your bank reconciliation as $100,500.00 (as according to the bank statement), there will be a different of $2,568.00. Besides, this payment transaction, $2,568.00, was not show in the reconciliation list and thus you can’t select it during your reconciliation process.
How? How are you going to amend your mistake made?
Change Closing Balance Method
One of the methods you can consider is to enter the closing balance as $103,068.00 instead of $100,500.00. This method is to add back the payment so it does not reflect in your closing balance. Then, on the following month’s reconciliation, you less off the amount from the closing balances.
Second method is to skip your bank reconciliation for the month of January 2012 and do both January and February 2012 bank reconciliation at one go.
Both methods are workable (if accountant and auditor accepted your method) provided it does not fall on to the month of your fiscal year closing.
Although, the above two methods resolved your bank reconciliation issue, in accounting point of view, it is still wrong. The payment was for the January rent but now you have recorded in the month of February 2012.
Another method, which I preferred, is to pass a journal in January to credit the bank and debit rent expense account, so it reconciled the bank account for the month of January 2012. Then, on the following month, I pass another journal to debit my bank and credit the rent expense account, so it contra off the wrong payment entry, which originally entered in February. This is a better method as it resolved the bank reconciliation issue and adjusted the accounting entry.