Bank Reconciliation Statements Bank reconciliation statements are statements prepared to reconcile the balances of bank balances as per the company’s records and as per the balances of the bank statements, as they may not always match owing to timing differences of financial transactions. For example, when a check is issued today by a company to a vendor for past purchases, it records a cash outflow in its statements today and lowers the balance of the bank in its books. However the actual balance of the bank account may not reduce till the check actually clears and hence there is a timing difference. These timing differences lead to difference between the balances of bank balances as per the company’s records and as per the balances of the bank statements and bank reconciliation statements help in reconciling these balances. To Prepare: Bank Reconciliation Statements

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Chapter 8, Problem 6QS

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Bank Reconciliation Statements

Bank reconciliation statements are statements prepared to reconcile the balances of bank balances as per the company’s records and as per the balances of the bank statements, as they may not always match owing to timing differences of financial transactions.

For example, when a check is issued today by a company to a vendor for past purchases, it records a cash outflow in its statements today and lowers the balance of the bank in its books. However the actual balance of the bank account may not reduce till the check actually clears and hence there is a timing difference.

These timing differences lead to difference between the balances of bank balances as per the company’s records and as per the balances of the bank statements and bank reconciliation statements help in reconciling these balances.

To Prepare:

Bank Reconciliation Statements

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Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's assets, Liabilities, and Equity?

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