How to Prepare a Bank Reconciliation: 8 Steps with Pictures

If it’s a missing check withdrawal, it’s possible that it hasn’t been cashed yet or wasn’t cashed by the statement deadline. The first step is for How to Do a Bank Reconciliation: Step-By-Step Process a company to compare its bank account statement with its bookkeeping record. The two figures are rarely the same when a reconciliation starts.

• In addition to this, the interest or dividends earned on investments is directly deposited into your bank account after a specific period of time.
• With that information, you can now adjust both the balance from your bank and the balance from your books so that each reflects how much money you actually have.
• Sometimes bank reconciliation problems may be bigger than you can handle alone, especially when they involve fraud.
• If there are any discrepancies between what you have and what’s on the bank statement, this is where you’ll need to add or remove transactions from the cash book to make them match up again.

NSF cheques are an item to be reconciled while preparing the bank reconciliation statement. This is because when you deposit a cheque in your bank account, you consider that the cheque has been cleared by the bank. But this is not the case as the bank does not clear an NFS cheque. In addition to ensuring correct cash records, the bank reconciliation process also helps in keeping track of the occurrence of any form of fraud. Such insights would help you as a business to control cash receipts and payments in a better way.

The Daily Bank Reconciliation

Bank reconciliation is the process of matching the bank balances reflected in the cash book of a business with the balances reflected in the bank statement of the business in a given period. Such a process determines the differences between the balances as per the cash book and bank passbook. Bank reconciliation statements compare transactions from financial records with those on a bank statement. Where there are discrepancies, companies can identify and correct the source of errors. Interest is automatically deposited into a bank account after a certain period of time.

Step two is to adjust the bank account balance and step three is to adjust the balance on the company’s books. It’s recommended to reconcile your checking, savings, and credit card accounts every month. Once you get your bank statements, compare the list of transactions with what you entered into QuickBooks. If everything matches, you know your accounts are balanced and accurate. Bank Reconciliation is the process of comparing your business’ books of accounts with your bank statements.

What are the Steps in Financial Reconciliation?

Whether you let the bank know or not, accounts could be affected. If you didn’t contact the bank to void the check, then you’ll have to document the check amount as a credit to the cash account. Reconciling a bank statement is like performing an investigation as to where and why the statements don’t match up. In the end, every item should be accounted for and the balances should align. Companies have the option to conduct bank reconciliations at their own frequency, be it daily, weekly, monthly, quarterly or annually.

They also can be done as frequently as statements are generated, such as daily or weekly. Bank reconciliation statements ensure that payments were processed and cash collections were deposited into the bank. Bank reconciliation statements are often used to catch simple errors, duplications, and accidental discrepancies.

Challenges With Bank Reconciliations

Take a look at the deposits on both your bank statement and within your general ledger. Make sure that your deposit amounts notated in the debit side of your cashbook are in agreement with your credit side of the bank statement. Conduct this for the opposite situation as well where the credit side of the cash statement in the bank column matches up with the debit side of the bank statement. Auto-reconciling transactions reduces human errors such as keying inaccuracies and adds security to the reconciliation process.

One way to keep accurate records is through bank reconciliation. Using this simple process each month will help you uncover any differences between your records and what shows up on your bank statement. Designed to keep your bank and your G/L in balance, the bank reconciliation process also helps you correct possible errors, account for uncashed checks, and even locate missing deposits. Don’t underestimate the importance of this very important tool. Basically, what you’re doing here is recording a change to the cash accounts in your general ledger. The bank account balance will adjust naturally as the transactions you identified in the second step move through the banking system.

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Keep in mind differences like NSF checks, bank charges, and cash account mistakes. Reconcile all transactions and ensure that the closing balances match on the balance sheet and the bank statements. Check if the bank deposits and withdrawals match the records on the balance sheet. If there are any differences between the bank statement and the balance sheet, cross-check to identify the mistake’s source. If the mistake is on the bank’s end, contact the bank and inform them.

The aim of any bank reconciliation is to make sure that the closing balance on your bank statement matches the Reconciled Balance in Sage Accounting. This may not always match the closing balance of your previous reconciliation. It will include reconciled errors or late entries from prior periods. You need to adjust the closing balance of your bank statement in order to showcase the correct amount of withdrawals or the cheques issued but not yet presented for payment.