What is Bank Statement Reconciliation?

Bank statement reconciliation is the process of verifying and adjusting the balance of a company’s accounting records with the corresponding amounts shown on the company’s bank statement. The goal of bank statement reconciliation is to identify any discrepancies and correct them. Common discrepancies include incorrect balances due to deposited checks not clearing, deposits appearing twice, or withdrawals appearing twice.

The process of reconciling bank statements with general ledger entries is called bank reconciliation. In this article we will talk about the steps involved in bank reconciliation and what mistakes to avoid. If you are confused about this process, keep reading. The goal of bank reconciliation is to find the difference between the bank balances. This process is essential for businesses to ensure their financial health. In this article we will discuss some of the most common mistakes that can occur during the process.

Process of reconciling bank statements with general ledger entries

The process of reconciling bank statements with general ledger entry dates involves comparing and adjusting records. Bank reconciliations are done to eliminate missing or incorrect information, not to create an alarming picture. For example, if a bank rejects a check, crediting the cash account and increasing the debit for accounts receivable will make the bank account balance appear lower than it really is. However, if you don’t reconcile bank statements every month, you could end up with a large amount of unpaid checks.

As a result, the bank reconciliation process creates a gap in the control process. For example, if an employee deposits a $5,000 check into a company account at the beginning of the month, but does not deposit it at the end, the reconciliation will not reveal the unauthorized loan. Instead, the bank statement could reveal a $5,000 loan that was not properly reconciled. This can leave the company vulnerable to fraud or other financial mismanagement.

During general ledger reconciliation, the accountant must obtain account balance details. In most cases, the reconciliation process will require the ending balance of each account as of the period’s end. However, some reconciliations also require the activity for a specific period, including debits and credits to the account. For this reason, the bank statement must be accompanied by supporting documentation to ensure that the accounts are correctly reconciled.

Steps involved in the process

Bank statement reconciliation is a process in which a business compares the balance on its bank statement with the balance on its book. The balances should match to the same extent. If they don’t, the bank statement will not be prepared. Otherwise, it will be a bank reconciliation, which involves investigation and balancing accounts. Listed below are the steps involved in bank statement reconciliation. Let’s start with the basics.

Reconciliations are done monthly or weekly. The longer the period, the higher the risk of discrepancies. Most bank reconciliations are performed at the end of every month. Bank statements contain information regarding company deposits, charges and account servicing fees. These documents should be gathered electronically so that a computer can process them efficiently. The first step is matching the issued checks and deposits with the records in the general ledger. Next, compare the two statements to determine whether they are in agreement or not.

If there are discrepancies, you should adjust the balances. For example, if a check is returned as unpaid, the bank must credit the cash account. In these cases, the balance is reduced and the account receivable is increased. After the records are compared, you should check for any missing deposits. Lastly, you should verify whether the balances match. Checking your records is the best way to avoid making mistakes when reconciling bank statements.

Common mistakes that can occur during a bank reconciliation

During a bank reconciliation, there are common errors that can occur. Sometimes the user makes a mistake and accidentally enters a mistaken number or transaction. In such cases, the amount should be subtracted. In addition, if the amount is incorrect, the user should delete the entry. Besides, it can also be a mistake if the bank makes an error. If you make one of these mistakes, you can easily fix them by using the right method of reconciliation.

Another common mistake that can be committed during a bank reconciliation is not tying all transactions. This error can occur when writing out a check or failing to enter all the standing orders. Make sure to link all bank statements to cashbook invoices and match all direct debits and standing orders to avoid errors. The final mistake to avoid is writing out a check or not comparing the bank statement with the general ledger.

The most common mistake that businesses make during a bank reconciliation is not identifying transactions. It might be as simple as receipting unknown funds, which will result in a surplus in the cashbook and a negative balance in the bank account. If you find yourself in this situation, you can easily fix the problem by checking bank feeds and using a reminder in your calendar to perform a reconciliation. You may also want to perform a daily reconciliation to avoid errors.

In conclusion, bank statement reconciliation is an important process that businesses use to ensure the accuracy of their financial records. By reconciling their bank statements with their accounting records, businesses can identify and correct any discrepancies that may have occurred. This process helps businesses maintain accurate financial information, which is essential for making sound business decisions.