Balance per Books
The balance per books refers to the ending cash balance in a company’s accounting records at a specific point in time. This balance is calculated by considering all the transactions recorded in the company’s books, such as deposits, withdrawals, checks issued, bank fees, and interest earned. The balance per books might differ from the balance per bank (the balance on the bank statement) due to outstanding checks, deposits in transit, unrecorded transactions, or errors. To reconcile the differences between the balance per books and the balance per bank, a bank reconciliation statement is prepared.
Example of the Balance per Books
Let’s assume that Company XYZ has the following transactions in its books for the month of March:
- Beginning cash balance: $10,000
- Deposit made on March 5: $5,000
- Checks issued on March 10: $2,000
- Deposit made on March 15: $3,000
- Bank fees charged on March 20: $50
- Interest earned on March 25: $20
Now let’s calculate the balance per books:
- Beginning cash balance: $10,000
- Add deposit on March 5: $10,000 + $5,000 = $15,000
- Subtract checks issued on March 10: $15,000 – $2,000 = $13,000
- Add deposit on March 15: $13,000 + $3,000 = $16,000
- Subtract bank fees on March 20: $16,000 – $50 = $15,950
- Add interest earned on March 25: $15,950 + $20 = $15,970
At the end of March, the balance per books for Company XYZ is $15,970. This is the cash balance according to the company’s accounting records. The balance per bank may differ due to outstanding checks, deposits in transit, or other discrepancies that need to be reconciled through a bank reconciliation statement.
