How to Prepare Bank Reconciliation? A Step-by-Step Guide

For instance, a company will have one Cash account for its main checking account, a second Cash account for its payroll checking account, and so on. For simplicity, our examples and discussion assume that the company has only one checking account with one general ledger account entitled Cash. You can earn our Bank Reconciliation Certificate of Achievement when you join PRO Plus. To help you master this topic and earn your certificate, you will also receive lifetime access to our premium bank reconciliation materials. These include our visual tutorial, flashcards, cheat sheet, quick tests, quick test with coaching, and more. Similarly, it’s not uncommon to have cheques that either haven’t been deposited yet or haven’t cleared the bank.

Completing a bank reconciliation entails matching the balances on your bank statement with the corresponding entries in your accounting records. The process can help you correct errors, locate missing funds, and identify fraudulent activity. Bank Reconciliation is the process of comparing your business’ books of accounts with your bank statements. It is done periodically to check whether the bank-related transactions are recorded properly in your books of accounts. 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.

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This balance exists when the deposits made by your business at your bank are more than the withdrawals. Making sure a company’s and its bank’s listed balances align is also a way to ensure the account has sufficient funds to cover company expenditures. The process also enables the company to record any interest payments the account has earned or fees the bank has charged.

If there’s a discrepancy between your accounts and the bank’s records that you can’t explain any other way, it may be time to speak to someone at the bank. Bank reconciliation is undertaken in order to bank reconciliation ensure that your balance as per the bank statement is correct. At times, your business entity may omit or record incorrect transactions for cheques issued, cheques deposited, the wrong total, etc.

How often should I reconcile my accounts?

To successfully complete your bank reconciliation, you’ll need your bank statements for the current and previous months as well as your company ledger. An online template can help guide you, but a simple spreadsheet is just as effective. Bank reconciliation statements are effective tools for detecting fraud, theft, and loss. For example, if a check is altered, the payment made for that check will be larger than you anticipate. If you notice this while reconciling your bank accounts, you can take measures to halt the fraud and recover your money. QuickBooks Online reconciled the bank statement items to arrive at the bank statement ending balance.

• While it’s highly likely that they are, issues do occur, and it never hurts to double check.
• The bank transactions are imported automatically allowing you to match and categorize a large number of transactions at the click of a button.
• The bank reported a balance of $9,970 and yet the records of Paul’s Plumbing show a balance of $11,800.
• The reconciliation process also helps you identify fraud and other unauthorized cash transactions.
• Outstanding cheques should be deducted from the balance to match your own records.
• For a more hands-off reconciliation experience, QuickBooks can help.