How To Complete a Bank Reconciliation Step By Step

1. Get bank records. You need a list of transactions from the bank. …
2. Get business records. Open your ledger of income and outgoings. …
3. Find your starting point. …
4. Run through bank deposits. …
5. Check the income on your books. …
6. Run through bank withdrawals. …
7. Check the expenses on your books. …
8. End balance.

How To Do A Bank Reconciliation (EASY WAY)

How to complete a bank reconciliation procedure

Here are the steps for completing a bank reconciliation:

1. Get bank records

You will require access to a list of your transactions in order to reconcile your records. Online banking, a bank statement, or allowing your bank to share data with your accounting software are all ways to obtain this information.

2. Gather your business records

You will also require access to the books or ledger of your business. Usually, this data is kept in an accounting program, logbook, or spreadsheet.

3. Find a place to start

Depending on when you last balanced your books, you can choose where to begin. If you’re unsure, try to remember the last time your books and bank account balance matched, then work backwards from there.

4. Go over your bank deposits and withdrawals

Verify that your bank statement accurately depicts all of your deposits and withdrawals. You must include any missing items if there are any.

5. Check the income and expenses in your books

Verify that every transaction is accurately recorded by comparing your books to the bank statements. Find out the cause of any mismatched items if there are any. Maybe a payment hasn’t cleared yet, or you forgot you bought something with cash.

6. Adjust the bank statements

A bank statement may occasionally not accurately reflect a company’s transactions. Outstanding checks, banking mistakes, or deposits that are still in transit are examples of common causes. Whatever the reason, update the bank statement as necessary.

7. Adjust the cash balance

In order to accurately reflect all of the company’s transactions, you will also need to adjust your records. To accomplish this, make sure that the company’s cash account is fully credited with all charges and deposits.

8. Compare the end balances

You must verify that the end balances are now the same after you have compared the records and made the necessary adjustments. At this point, the reconciliation process should be finished. You will need to repeat the procedure to identify the mistake if they are still unequal.

What is bank reconciliation?

The process of comparing a company’s books with its bank statements to make sure all transactions are recorded is known as bank reconciliation. The procedure is a useful way to maintain accurate records, prevent fraudulent charges, and address any other issues or discrepancies. The majority of businesses conduct bank reconciliation, also known as bank rec, at the end of each month, but the frequency is largely based on the size of the business and the volume of transactions that take place. For instance, some larger businesses find that daily record reconciliation is necessary.

Regardless of the frequency, bank reconciliation should be completed regularly. Although some businesses continue to maintain their records manually, there is bookkeeping software available that streamlines the procedure. The majority of these programs combine the business’s bank accounts, providing all the information and records in one location.

Reasons to conduct bank reconciliation

There are many benefits to performing regular bank reconciliation. Some of these include:

Common issues found during bank reconciliation

To identify any issues, performing a bank reconciliation is important for a number of reasons. Here are a few typical issues you’ll encounter during bank reconciliation:

Example of a bank reconciliation

On May 2, a new business opened a bank account with a $10,000 deposit. The business issued four checks totaling $5,000 in the same month and deposited $2,000 at the close of business on May 31. As a result, the company’s books, or cash account, show a debit balance of $7,000 as of May 31. On May 31, however, the bank statement shows a balance of $5,975.

There needs to be a reconciliation because the bank statement and the books show different balances. They must compare the details of both records in order to achieve this. Lets say that:

They must add the missing transactions in order to reconcile and ensure that both balances are equal. To do this they will:

The balance on the bank statement is compared to the company’s books, which show a balance of $6,975 at this time.

FAQ

What are the 4 steps in the bank reconciliation?

1. COMPARE THE DEPOSITS. Compare the deposits between the bank statement and the business records.
2. ADJUST THE BANK STATEMENTS. Adjust the bank statements’ balance to reflect the corrected balance.
3. ADJUST THE CASH ACCOUNT. …
4. COMPARE THE BALANCES.

What is a bank reconciliation and how is it completed?

A bank reconciliation statement compares an entity’s bank account to its financial records and summarizes banking and business activity. Statements of bank reconciliation attest to the processing of payments and the deposit of cash earnings into a bank account.

What are the three steps in bank reconciliation process?

1. Step one: Comparing your statements. …
2. Step two: Adjusting your balances. …
3. Step three: Recording the reconciliation.