Monthly Bank Reconciliation Worksheet

you are doing a monthly bank reconciliation

A check that a company mails to a creditor may take several days to pass through the mail, be processed and deposited by the creditor, and then clear the banking system. Therefore, company records may include a number of checks that do not appear on the bank statement. These checks are called outstanding checks and cause the bank statement balance to overstate the company’s actual cash balance. Since outstanding checks have already been recorded in the company’s books as cash disbursements, they must be subtracted from the bank statement balance. A bank reconciliation statement is a summary of banking and business activity prepared by a company or individual.

As payments are sent out and received during the month, bookkeepers, clerks and accountants will record debits and credits. These records should match with external accounts like bank statements. You could have accidentally booked a journal entry that debited or credited cash.

Business Owners Toolkit

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you are doing a monthly bank reconciliation

Notice that the bank reconciliation form above still does not balance, even after including the outstanding checks. This means the bank has made an adjustment to your account that has not been recorded in your G/L. It’s common for your bank statement to have a higher ending balance than your G/L account shows. While it may be tempting to assume you have more money in the bank than you think, it’s a safe bet that the difference is checks and other payments made that have not yet hit the bank. Clients often ask me when I use Bank Feeds why do I have to reconcile to the bank statement? We often find omissions in a Bank Feed that would not be caught if we didn’t reconcile to the statements at the end of each month.

Subtract Any Fees and Outstanding Checks

A bank reconciliation is a process of matching the balances in a business’s accounting records to the corresponding information on a bank statement. The goal of the bank reconciliation process is to find out if there are any differences between the two cash balances. If there are any discrepancies, you have to recheck your company’s accounting records as appropriate. Therefore, each transaction on the bank statement should be double‐checked. If the bank incorrectly recorded a transaction, the bank must be contacted, and the bank balance must be adjusted on the bank reconciliation. If the company incorrectly recorded a transaction, the book balance must be adjusted on the bank reconciliation and a correcting entry must be journalized and posted to the general ledger.

  • However, anything that affects the G/L such as unexpected deposits, interest income, or service fees will need to be recorded.
  • Outstanding checks are those that have been written and recorded in cash account of the business but have not yet cleared the bank account.
  • This helps ensure payments have been processed and cash collections have been deposited into the bank.
  • Having control over the company’s accounting means knowing how it works and how it evolves over time.
  • Comparing your bookkeeping against the records provided by your bank can also help you identify unusual transactions that might be caused by fraud or accounting errors and locate any missing funds.
  • Match the deposits in the business records with those in the bank statement.

After adjusting the balances as per the bank and as per the books, the adjusted amounts should be the same. If they are still not equal, you will have to repeat the process of reconciliation again. To do this, businesses need to take into account the bank charges, NSF checks and errors in accounting. Deposits in transit are amounts that are received and recorded by the business but are not yet recorded by the bank. Businesses maintain a cash book to record both bank transactions as well as cash transactions. The cash column in the cash book shows the available cash while the bank column shows the cash at the bank.