What Is a Bank Reconciliation Statement?

A bank reconciliation statement is a summary produced by a bank of a customer's recent banking activity, provided for purposes of comparison with the customer's internal records.

Bank reconciliation statements are used by businesses, auditors, and accountants to detect errors or omissions between their accounting records and their bank account balances.

Reasons for Preparing a Bank Reconciliati🦩on Statement

A bank 澳洲幸运5官方开奖结果体彩网:reconciliation statement allows companies and auditors to verify the accuracy of financial records and compare these reco🔯rds with bank account balances.

Here are some spe🅷cific reasons why you might prepare and use a bank reconciliation statement:

• Identify and prevent errors: Cross-referencing your bank account(s) and financial records can help you verify the accuracy of any checks, deposits, transfers, and other transactions you've authorized and whether they've cleared.
• Fraud detection: Reconciling your accounts can help you identify and report any fraudulent activity, including unauthorized transactions.
• Cash control: You can use your statement to help reconcile your cash accounts and ensure that any cash activity is valid and accurate.
• Tracking expenses: Your statement can help identify how much you pay in monthly bank fees, interest, and other expenses. This helps at tax time and to determine if there are any opportunities for improvement.
• Confirming 澳洲幸运5官方开奖结果体彩网:accounts receivable (AR): A bank reconciliation statement can identify or confirm any outstanding customer debts, allowing you to take action to collect on these accounts.
• Improving balance sheet accuracy: Using a bank reconciliation statement ensures that the amounts recorded on the 澳洲幸运5官方开奖结果体彩网:balance sheet correspond to transactions in your financial account.
  

How Often Should You Reconc♛ile Your Bank Accou𝓰nt?

How often you reconcile your bank accounts depends entirely on your needs. Individuals and businesses with simple accounting needs should consider reconciling their accounts monthly after receiving a 澳洲幸运5官方开奖结果体彩网:bank statement.

Businesses with a higher volume of transactions should consider increasing the frequency of reconciliation—either daily or weekly. Increasing the frequency makes 澳洲幸运5官方开奖结果体彩网:cash flow management easier, helps you catch any discrepancies, and gives you enough time to correct errors before any ꧙c𝕴omplications arise in your accounting.

How to Do a Bank Reconciliation

Follow these steps to perform a bank reconciliation.

Step 1: Gather Your Documents

To perform a bank reconciliation, gather your financial records, including your bank statement(s) and any internal records. These can include invoices, financial statements from 澳洲幸运5官方开奖结果体彩网:checking accounts, a general ledger, and cashbooks detailing your financial transactions.

Step 2: Compare Your Balances and Activity

Your bank statement and financial records contain your opening and closing balances for the month. Compare the endi♚ng cash balance of your bank accounts to your internal financial records.

• Match your deposits (cash or checks) and credits to your bank account with your accounting records.
• Match your withdrawals, invoice payments, interest charges, and 澳洲幸运5官方开奖结果体彩网:bank fees.
• Cross-reference the bank statement activity with your accounting records, noting missing transactions or discrepancies, such as a check cleared for an incorrect amount.
• Watch out for fraudulent items on your bank statement.
  

Step 3: Investigate and Record Outstanding Transact♏ꦦions

Investigate any discrepancies. These may be checks, invoices, or deposits recorded in your accounting records that are not reflected on your bank statement, including outstanding che🍃cks that havܫe yet to clear your account.

Similarly, identif🍷y any transactions in your bank account that are not reflected in your internal records, such as bank fees, interest in🀅come, and overdraft fees.

Step 4: Make Adjustments and Reconcile Your Bℱalances

Make the necessary adjustments to the 澳洲幸运5官方开奖结果体彩网:bank statement for errors or missing transactions. For instance, if there's an outstanding check that has yet to be cleared, add it to correct your bank account balance. From there, compare the new, adjusted cash balances of your bank account to your accounting records. If🤡 any errors remain, repeat the process.

Step 5: Keep Records of Your Changes

澳洲幸运5官方开奖结果体彩网:Keep your documents and records of all of your changes, including source documents and details of the reconcilement and adjustment process. Record descriptions of errors and accounting adjustments so you can easily review this information at a later date. Detailed records can help prevent errors in the future. You may want some of the information for the next account reconciliation.

Example of a Bank Reconciliation Statement

Here's a hypothetical example to show how bank reconciliation statements work using a snapshot of Company XYZ's books.

Let's say the company has a $145,000 beginning balance and the following transactions:

1. A $10,000 payment by check from a client
2. A $15,000 check issued to a supplier that hasn't cleared the account yet
3. A cash deposit of $2,500
4. A correction for an erroneous deposit from the previous month of $3,000
5. A service charge of $50 from the bank
6. Interest credited to the account for $100

The company's accountant may complete the reconciliation as follows; parentheses indicate debits from the account, and no parentheses indicates a credit to the account:

The Bottom Line

A bank reconciliation statement can help if a company's accounting records show different transactions than its bank statements. Reconciling the bank statement and internal records can identify and correct errors and uncleared transactions. When using a bank reconciliation statement, keep detailed records and notes so you can cross-check your adjustments with those made on future bank statements.