Bank Reconciliations
A bank reconciliation is the process of comparing the balances in your company's bank account with the balances in your accounting records to ensure they match. This helps identify any discrepancies or errors in your financial records.
The bank reconciliation process requires some time consuming and tedious tasks.
Note: Accounting software has speeded up this process.
- All checks and payments listed on the bank statement must be compared to the check amounts recorded in the company’s general ledger Bank(Cash) account. Any differences, such as the company’s outstanding checks and errors, will become part of the adjustments listed on the bank reconciliation.
- All deposits listed on the bank statement must be compared to the receipts recorded in the company’s general ledger Bank(Cash) account. Any differences, such as a deposit in transit and/or errors, will become part of the adjustments listed on the bank reconciliation.
- Miscellaneous items listed on the bank statement must be compared to the miscellaneous items recorded in the company’s Bank(Cash) account. Any differences, such as bank service charges, checks returned because of insufficient funds, collections made by the bank, etc., will be part of the adjustments listed on the bank reconciliation.
The adjustments based on the above differences will be added to or subtracted from one of the following amounts:
- The unadjusted balance from the bank statement (or online banking information)
- The unadjusted balance from the company’s general ledger Bank(Cash) account
A common Bank Reconciliation form is listed below:
| Company Name Bank Account Reconciled Date | |||
| Balance Per Bank | Balance Per Books | ||
| Unadjusted Bank Balance | $ xxxxx.xx | Unadjusted Book Balance | $ xxxxx.xx |
| +/- Adjustments | xxxx.xx | +/- Adjustments | xxxx.xx |
| Adjusted Balance Per Bank | $ xxxxx.xx | Adjusted Balance Per Books | $ xxxxx.xx |
Notice the following items in the Bank Reconciliation form:
- The left side is labelled Balance per Bank
- The right side is labelled Balance per Books
Adjustments to Bank (on the form's left side) are the items that are in the company’s general ledger Bank account; but, they have not yet been recorded in the bank’s records. Examples are outstanding payments and checks (payments and checks recorded in the general ledger Bank account not yet recorded/processed by the bank) and deposits in transit (receipts recorded in the general ledger Bank account not yet recorded/processed by the bank).
Adjustments to Books (on the form's right side) are the items that the bank has recorded/processed; but, the items are have not yet been recorded in the company’s general ledger Bank account. Examples include bank fees and bank credit memos..
In order for the general ledger Bank account to reflect the actual Bank balance (reconciled balance) the items listed under Adjustments to Books must be recorded in the company’s general ledger accounts normally using Journal Entries.
Bank Reconciliations Video
Additional Bank Reconciliations Videos