Bank Reconciliation Definition & Example of Bank Reconciliation

Thus, such a situation leads to the difference between bank balance as per the cash book and balance as per the passbook. After adjusting all the above items, what you get is the adjusted balance as per the cash book. Once the balances are equal, businesses need to prepare journal entries for the adjustments to the balance per books.

• Bank Reconciliation might seem like a chore, but it’s a super important one that can save you money and headaches in the long run.
• The template provides a column for check numbers, dates, descriptions, debits, credits, and the resulting balance.
• This is done to confirm every item is accounted for and the ending balances match.
• It is important to note that it takes a few days for the bank to clear the cheques.
• Such a time lag is responsible for the differences that arise in your cash book balance and your passbook balance.

For starters, you should obviously count and record cash on a daily basis. It may also be necessary to pull a current sales report throughout the day if your business is making a lot of transactions with cash. If you are taking accounting into your own hands, the first step is identifying what sort of report you need. FreshBooks offers a collection of accounting report templates to help you start off on the right foot.

Posts from: Excel Reconciliation Formula

Such a difference needs to be adjusted in your cash book before preparing the bank reconciliation statement. In addition to ensuring correct cash records, the bank reconciliation process also helps in keeping track of the occurrence of any form of fraud. Such insights would help you as a business to control cash receipts and payments in a better way. The bank balance showcased in the passbook or the bank statement must match the balance reflected in the cash book of the customer. It is up to you, the customer, to reconcile the cash book with the bank statement and report any errors to the bank. Outstanding checks are those that have been written and recorded in cash account of the business but have not yet cleared the bank account.

Then, enter each charge amount along with dates and account numbers. This template can be used for travel, entertaining clients, or other authorized business expenses. Make sure that your credit card statement matches the transactions reported on the reconciliation template. Calculate the balance of a company’s assets, liabilities, and equity to get a snapshot of its financial position at any given time. The template includes lines for assets such as cash, accounts receivable, inventory, and investments, along with liabilities, including accounts payable, loans, and payroll. Add your own line items to this Excel sheet, and the template will automatically calculate the totals.

• Such deposits are not showcased in the bank statement on the reconciliation date.
• Your tax accountant will want to check the accuracy of your cash
  book by viewing your final bank statement and reconciliation statement
  for the end of the year.
• He is the budgeting and family travel enthusiast behind Family Money Adventure.
• Such cheques are the ones that have been issued by your business, but the recipient has not presented them to the bank for the collection of payment.
• In this step, we will make a Bank Reconciliation Template in Excel.
• Once the journal entries are recorded, the general ledger is prepared.

This relatively straightforward and quick process provides a clear picture of your financial health. Consider reconciling your bank account monthly, whether you set aside a specific day each month or statement sections do it as your statements arrive. As with deposits, take time to compare your personal records to the bank statement to ensure that every withdrawal, big or small, is accounted for on both records.

Adjust the internal records:

Bank statements should list how much interest your business has earned each month. You may also see returned check fees and overdrafts on the statement as well. The bank may also add a service charge for operating the account.

Bank Account Reconciliation Template from MSOfficeGeek

Check for bank fees, direct debits, un-entered (forgotten) transactions, duplicate entries, or transactions that may have been incorrectly entered. Electronic deposits not yet recorded by the company will become additions to the cash balance per books. Outstanding checks are a deduction to the balance per bank; deposits in transit are an addition to the balance per bank. And then you’ll be limited to the daily withdraw limit set by your bank.

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The final part of the template provides an adjusted balance as per the depositor and the bank statement. It’s perfect for those who want to ensure the accuracy of their financial statements, track discrepancies, and maintain proper control over their cash flow. Also important to note is that you should never reconcile a bank statement to today’s date, because today is not yet over and your closing balance might change by the end of the day. The purpose of this is to avoid confusion if there is ever a need for the sender and recipient to compare transactions.

First, Get Your Bank Statement and Your Records

This is accomplished by scanning the two sets of records and looking for discrepancies. If you find any errors or omissions, determine what happened to cause the differences and work to fix them in your records. The Bank Account Reconciliation Template from MSOfficeGeek is a comprehensive solution for individuals or businesses who need to reconcile their bank statements. The template automatically calculates the adjusted checkbook and statement balances, and indicates if these balances match, making it easy to spot any discrepancies. Here you will see a sample and have access to a free, printable template. This information can also be used to balance your personal bank accounts.

The template provides a column for check numbers, dates, descriptions, debits, credits, and the resulting balance. It even includes video instructions that you can access with a simple click. It maintains a detailed record of your assets, liabilities, and shareholder’s equity, giving you a comprehensive understanding of your financial position.

To quickly identify and address errors, reconciling bank statements should be done by companies or individuals at least monthly. They also can be done as frequently as statements are generated, such as daily or weekly. Non-sufficient funds (NSF) checks are recorded as an adjusted book-balance line item on the bank reconciliation statement. You first need to determine the underlying reasons responsible for the mismatch between balance as per cash book and passbook. Once you have determined the reasons, you need to record such changes in your books of accounts.