How to Do Bank Reconciliation

Bank reconciliation is a process to check whether the company’s checking transaction records match with the bank statement. It is important to do a bank rec to check for possible errors in either record and correct them when necessary.

How to do it? Find out the basics of doing a bank reconciliation from our basic guide.

Bank reconciliation is a process wherein a company or a person compares a record of its checking transactions with the statement issued by the bank. It is a check on whether the transactions recorded by the company or person coincide with what actually appeared on the bank statement. Always, they will not match, often because of time factors in check clearing and because there are some charges that the bank do against the account that the company may not be aware of until it sees it on the bank statement.

To do a bank reconciliation, one needs a record of the company’s checking transaction and the bank statement. There should be an inclusive period for which the bank reconciliation is done. If it is done monthly, it is easier to make the end date of the bank rec the same date that the bank statement ends.

Doing the Bank Reconciliation

The first thing to do is to cross match the same transactions to make sure all the transactions recorded in the company’s ledger and the bank statement agree. Go down through the individual transactions on one record and tick off the same transaction in the other. While going through the records, pay attention that the individual digits match. After this, look at each item that was not ticked. These items could be bank charges, and interest earned. There may also be some issued checks and deposits recorded in the ledger that are not on the bank statement. This is due to some delays in the time that the check clears. The company ledger entry should be adjusted to reflect the items that are not on it but were on the bank statement such as the bank charges and the interest on deposits. And the bank statement should be adjusted to reflect checks that were not yet presented and deposits that were not yet cleared. After this, both balances should match.

Why Bank Reconciliation is Important

Bank reconciliation is necessary for several reasons. Rather than relying solely in the company or personal record, doing a bank reconciliation is a way of keeping tabs on what actually happens on the account. Foremost, it is a way of checking for errors or irregularities in either your record or that of the bank. It may be that the check amounts were entered incorrectly, the charges are not what they are supposed to be, or there are transactions made without the company’s knowledge. Detecting the error makes it possible for a correction to be made; detecting the irregularity makes it possible to do some steps to prevent further problems. A bank reconciliation should be done at least monthly.


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