 In this discussion, we will discuss the discussion question of describe adjustments that may be discovered during a bank reconciliation process. So, if we see a discussion question like this or an essay question like this, we may first want to give a recap of what a bank reconciliation is, why it is there, and then go into what type of adjustments we may discover during that process. So, the bank reconciliation is going to be one of those internal control processes we have over cash, but also an internal control that's going to be useful for any cycle because cash is involved in pretty much all the accounting cycles. If we're talking about the purchasing cycle, the sales cycle, the employee payment cycle, the wages and whatnot, then cash is involved in there somewhere. So, for us to double check the cash helps us to verify cash as well as some of these other processes. So, what we're going to do is we're going to check the bank balance to the book balance as of the end of a time period. Typically, we'll get statements from the bank on a monthly basis. So, say we got a bank statement for the month of March, March 31st ending, then we would compare the bank balance that's on this statement as of March 31st to our balance, which is in our books as of March 31st. And we would see that if they're the same, that would be great, probably not the case. And we're going to see what is the difference between those two items. Now, as we go through this process, then when we see there's a difference, what we're going to do is literally go through and just tick and tie off what is on the bank statement and what is on our books. And we're going to see what is different, what is going to be on the bank that's not on our books, what's on our books that's not on the bank. So, we're going to go through and just tick and tie off everything that's the same, which will be the vast majority of things, hopefully. And then we'll find out what those differences are. Now, if there's a differences on the bank balance, on the bank statement that's not on our books, if we go through the process of March and say, hey, this is on the bank, but it's not on our books, those are the things that we're typically going to have to, those are the things we've discovered that we're probably going to have to make an adjustment for. So, we're going to have to, we're going to have to actually make a journal entry typically and adjust our books for something that was on the bank statement, not on our books. If something's on our books, but not on the bank statement, then that's probably the case that it's just outstanding, meaning if it's on our books like a check and it hasn't, it's not on the bank statement for the same time period, it's probably the case that we wrote the check, but it has not yet cleared the bank. The bank doesn't know about it yet because it has not yet cleared and therefore it would be outstanding. That would be something that's not really an adjustment for us, it's going to be something that we're just going to record in the bank reconciliation in order to reconcile the bank balance to the book balance. If we had something like a deposit on our books, not on the bank statement, it's probably the case that the deposit is outstanding, same scenario, we're not going to make an adjustment for it because our books are right, we're just going to note it on the bank reconciliation. So really what we're focusing here when we're saying adjustments that need to be made, those are going to be items that when we compare the bank statement to our books that are on the bank statement, but not on our books. So for example, if there was a service charge from the bank that they just charged us money and they took it out of our bank account, then we would not know about that until we got the bank statement. And it's not a timing difference, it's not something that we just didn't record yet, it's something that's permanent. So we're going to have to adjust for that, meaning we're going to have to debit something like bank service charges and expense and credit the cash account, reducing our checking account by the amount that's recorded there. If there's a deposit that we see on the bank statement that's not on our books, then it's probably something that came due, possibly an investment came due, a CD or savings account came due and it automatically got deposited into our checking account. Well, that's something that we possibly didn't know about, we didn't record it until we got the bank statement. So then we're going to have to record that, which would be a debit increasing the checking account, then we would credit the investment, probably an asset account on our books, where we had recorded the asset. And then we might have to have earned something like interest or dividends, which would be revenue, which we can credit the interest or dividends as well. If there's any kind of errors in the recording of checks, if we wrote the check for $100 and it should have been, or we recorded it at $100 and it should have been recorded at $150, then of course we'll have to make an adjustment for that as well. Typically the bank would probably be correct because that's how much money came out of the bank, $150. And in our books, we only had $100. So we'll have to make the adjustment there, we'd have to credit the bank, the checking account and debit for $50 to something. And that would of course depend on what we spent the $150 on. So if we paid off accounts payable, then possibly go to accounts payable. If we paid for an expense or something like that, we'd have to discover or find out what we made that payment for. It's also possible for us to have things like electronic transfers that we make directly from the bank statement that possibly we're not recording as we go. So especially smaller companies might be actually doing a lot more electronic transfers and then once they get the bank statement at the end of the time period, we hadn't yet recorded because we didn't record a check. We didn't write a check out of our computer system. Now on a night, ideally we would write, you know, that we would record the transfer at the point in time we make the payment. But if we haven't, then if we see payments that are made out of the checking account and we're just recording them at the end of the month, we then of course will have to record those decreasing the checking account and recording the related expense for any type of electronic payments we've made during the time period. So those are going to be the major kind of adjustments we're going to make. Just the main principle here, of course, is that anything that's going to be on the bank statement that's not on our books, that's typically going to lead to us fixing our books, the bank typically being correct. So the only time the bank is usually wrong under normal conditions, they could have made an error. But usually when the bank is wrong, it's not really wrong, it's just a timing difference. So anything on our books that's not on the banks is typically not an error on the bank side, but lack of knowledge yet because they have not yet received the information. Anything that's on the bank side that's not on our side is probably something that we need to adjust. The bank's probably not going to give us the money back. And so we're going to have to fix our side of the books and actually make an adjustment for it.