Until examined by the auditor, all paid checks and other
items returned by the bank should be filed with the bank state-
ment on which they appear.
 The importance of reconciling the bank balance cannot be
overemphasized. The procedure is as follows:
 1. When the bank statement has been received (usually two
 or three days after the end of the month), arrange can-
 celled checks in numerical sequence.
 2. Check off, in the distribution of expenditures journal, each
 check that has been paid and returned by the bank. This
 is done usually with a red pencil or a similar device.
 3. Prepare a list of the outstanding checks (checks which
 have been written and entered in the record book but
 which have not cleared the bank) on the bottom or back
 of the bank statement. Deduct the total of the outstanding
 checks from the balance shown on the bank statement.
 4. If you have deposits in transit (receipts entered in the
 record book but not shown on the bank statement as of
 the date of reconciliation) add the total of these to the
 balance referred to in Item 3 above. If there are no de-
 posits in transit, disregard this step.
 5. After following the steps on Items 3 and 4, the figure
 should be the same as that shown on the depository ledger
 account and the last check stub of the month just ended.
 If the amounts do not agree, a mistake has been made
 (either in the records or in the reconciliation procedure)
 and should be traced to source immediately.
 6. Corrections should be made for any mistakes discovered.
 Sometimes it is necessary to check each cancelled check
 and each deposit against the bank statement and/or ledg-
 ers to find the error. If an error is found on the bank
 statement, notify the bank and get a corrected bank state-
 ment. (A form of Bank Reconciliation is illustrated on
 page 21.)
 The following types of transactions are deemed to require
individual consideration:
 Bank Service Charges-If the banks require a service charge
on Student Activity Funds, the amount of the service charge