How to do a step-by-step bank reconciliation

Bank reconciliation is the process of comparing accounting records to a bank statement to identify differences and make adjustments or corrections. In the case of personal bank accounts, like checking accounts, this is the process of comparing your monthly bank statement against your personal records to make sure they match. Many banks allow you to opt for fee-free electronic bank statements delivered to your email, but your bank may mail paper bank statements for a fee. A practical bank reconciliation example could involve a business discovering discrepancies between its bank statement and cash account balance. Therefore, the bank reconciliation process should be carried out at regular intervals for all of your bank accounts.

Since the bank statement balance according to the bank reconciliation matches the bank balance in the bank statement, the reconciliation can be considered correct. Preparing a bank reconciliation requires a company to take a step by step approach. The easiest step by step approach to preparing bank reconciliation is through a 5-step process.

Company’s Records

However, connecting your accounting software to your bank or financial institute does not take the place of doing a month-end bank reconciliation. When a company writes a check, the company’s general ledger Cash account is credited (and another account is debited) using the date of the check. Therefore, a check dated June 29 will be recorded in the company’s accounts using the date of June 29, even if the check clears (is paid through) the company’s bank account one week later. which of the following is not a step in preparing a bank reconciliation? After adjusting the balance as per the cash book, make sure that you record all adjustments in your company’s general ledger accounts. Before you reconcile your bank account, you should ensure that you record all the transactions of your business until the date of your bank statement. If you want to prepare a bank reconciliation statement using either of these approaches, you can take balance as per the cash book or balance as per the passbook as your starting point.

As a result, the bank debits the amount against such dishonored cheques or bills of exchange to your bank account. As mentioned above, bank overdraft is a condition where a bank account becomes negative as a result of excess withdrawals over deposits. Standardizing the process with a set of steps to follow for reconciliation can make the process more organized and save time. Companies can designate several individuals to handle certain aspects of bank reconciliation, and they can complete reconciliations in a variety of ways. The basic sequence, of preparing a bank reconciliation, consists of the following eight steps.

Helpful Tips for Bank Reconciliation Adjustments

The reconciliation statement allows the accountant to catch these errors each month. The company can now take steps to rectify the mistakes and balance its statements. Thus, such a situation leads to the difference between bank balance as per the cash book and balance as per the passbook. When you compare the balance of your cash book with the balance showcased by your bank passbook, there is often a difference. After adjusting all the above items, what you get is the adjusted balance as per the cash book.