What is Book Balance in GTBank?
Book balance is a company’s cash balance according to its accounting records and can include transactions that are yet to be settled or cleared through the bank account.
It reflects the funds that a company owns after they have made adjustments for checks that have yet to clear, deposits in transit, or other pending deductions from an account.
For an individual with a GTBank account, Book Balance is the total of all sums in your Account Book and can include transactions that are yet to be settled or clear through the bank account.
What Is Book Balance In GTBank?
An example is a balance on the 31st of January in the company’s general ledger account entitled Checking Account. It is the book balance that pertains to the bank account undergoing reconciliation.
For an individual, the book balance is likely to be the balance appearing in the person’s check register.
It is common for the book balance to not agree with the balance on the bank statement as of the same day.
This is the case when there are bank fees or electronic transfers on the bank statement that are yet to be recorded in the company’s general ledger accounts.
For example, the bank statement may reveal that they withdrew a bank service charge from the account on the last day of the month.
Difference between Book Balance & Bank Balance
There are multiple differences between the bank balance and book balance;
- First, there are likely to check outstanding that were recorded in the company’s book balance. But they have not presented them to the bank, and therefore, the bank does not record it in their book balance.
- Second, the GTBank account owner may have incorporated a deposit in transit into its book balance. When the bank has not yet processed it, it does not appear in the bank balance.
- Third, GTBank usually charges the account owner a variety of fees, such as interest charges, account maintenance charges, and check processing charges, which are evident in the bank balance but not in the book balance.
Finally, the individual, which is the account owner or the bank, may have erroneously recorded a transaction.
Consequently, this could result in an unresolved difference between the two balances.
These differences are formally stated in the bank reconciliation.
Causes of Difference in Book Balance & Bank Balance
It is possible that GTBank deducts the bank account service charges from GTBank customer’s bank accounts throughout the entire month.
But, they would not record those debits in the book balance until the bank reconciles the month-end numbers.
Uncleared Checks and Deposits
Uncleared Checks are the checks that they write and send out but have yet to clear through the banking system.
These deductions would show in the book balance but will not reflect yet in the bank account balance.
As a result, a company’s book balance would be lower than the bank balance until the payee has deposited the checks into their bank. And also presents it to the payor’s bank for payment to the payee.
You can also check: How to check account balance GTBank.
Typically, they record a deposit and make the cash available to the depositor. They do these before they clear the check and debit the paying bank.
As a result, the funds—called float funds—undergo a double-counting process until the clearing process is complete.
Float funds occur due to the time gap between a deposit and a withdrawal and delays in processing checks.
Interest earned on an account is often paid on a company’s cash balance and is credited to the bank account at the end of the month.
The interest could be from a savings account or a cash sweep. A cash sweep is when the bank withdraws unused funds in a company’s checking account and invests that money in short-term investments. The cash sweep allows the company to earn interest on their idle cash.
As a result, the interest earned would not show in the balance until they have credited the interest. Also, when they have performed the bank account reconciliation.
Adjustments and Errors
Undoubtedly, the banks often have to make adjustments to the errors where applicable. This is important in order to prevent bank transactions that would lead to discrepancies between both book and bank balances.
If a check included in a deposit had insufficient funds, the bank would withdraw that money out of the company’s checking account.
Also, it is not impossible to record a deposit incorrectly in a company’s book balance. This could result in an imbalance in the amount received by the bank and the company’s accounting records.
The result would lead to a higher book balance than the bank balance. Also, sometimes the bank can make an error and record a transaction incorrectly, leading to an inaccurate bank balance.
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Without a doubt, I believe you found the answer to “what is a book balance in Databank?” in this post.
It is possible to prepare a bank reconciliation statement to summarize the banking activity for an accounting period. Subsequently, GTBank would compare this to financial records and book balance in GTBank.
At any time, if you encounter any of the problems listed above, you can contact GTBank through any of their social media handle or the website created for the purpose, and submit your NUBAN number along with your request.