For a bank statement reconciliation, the account balance provided by the bank is compared to the general ledger of a company or a business.
Businesses or companies maintain a record book in which they record both bank transactions and cash movements. The cash book’s cash column reports the available cash, whereas the bank column reports the cash present in the bank.
In this way, every bank stores an account for every customer. In the bank passbooks, withdrawals are recorded under the debit side, and deposits are registered under the credit side. It helps the banks send each transaction’s information to their customers every month or at periodic intervals.
Whenever these balances don’t show similarities, businesses need to check the reason behind this issue and reconcile the difference. To perform this, a reconciliation statement known as the bank reconciliation statement must be prepared.
A Step-by-Step Guide On The Process Of Bank Reconciliation
Whenever you receive a bank statement, basically at the end of the month, that statement will include all the cash and other deposits made into the particular business’s checking account.
The receipt also contains bank charges, such as account maintenance charges. When you receive this statement, follow these phases to reconcile a bank statement.
Comparison of Deposits
Compare the deposits in the business records with those in the statement from the bank. Note the residues that show the difference and mark the deposits appearing in both the documents.
Bank Statements Adjustment
Manage the balance on the bank statements to the corrected one. To do this, you need to add deposits in transit, deduct long-standing checks and add/deduct bank errors.
The Cash Account Adjustment
The following step is to adjust the cash balance present in the business account. Adjust the amount balances in the business account by including interest and excluding monthly charges and overdraft fees.
For doing this, businesses have to consider bank charges, NSF checks, and accounting mistakes.
- Bank charges are the charges of the bank for maintaining the accounts. These charges include deposits, withdrawal, and annual maintenance charges.
- The NSF check is a check, which doesn’t receive any honor from the bank.
- Errors in the cash account lead to the incorrect amount being entered or an amount deducted from the account.
Compare The Amounts
According to the bank records and business records, you must compare the similarity of the balance after adjusting the amounts. If they are still not similar, you have to redo the entire process with a lot more attention.
Once the balances tend to be equal, businesses or companies must prepare journal entries for the adjustments per record books.
How Many Times Should You Reconcile Your Bank Account?
For better maintenance, you should reconcile your bank statement whenever you receive a bank statement. Ideally, you can perform bank reconciliation at the end of every month. But the businesses that have more transactions opt for bank reconciliation services weekly and even at the end of each day.
Before performing bank reconciliation, businesses must ensure that they have assured records of each transaction.
What Is The Main Purpose Of Bank Reconciliation?
The bank reconciliation services offer various advantages that include:
- Checking errors, like double payments, skip payments, calculation mistakes, etc.
- Detecting and including bank fees and penalties in the books.
- Spotting fraud transactions.
- Maintaining track of accounts payable and receivable.
Performing bank reconciliation with the help of accounting software is user-friendly and enables fewer mistakes.
Accounting software will receive all the bank transactions directly from the bank. This import will allow you to compare and categorize the balances accordingly, just with one click of a button.
If you are looking for credit and bank reconciliation services for your business or company, FinAcc Global can offer you the best bank reconciliation services. We are among the top accounting and finance outsourcing service providers with the best expert team to manage the significant business’s bank reconciliation process.
Join us to know more about how we work and offer the best bank reconciliation services that enable us to make improved decisions for your business.