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How to correctly perform a bank reconciliation

You need to make a Bank reconciliation because it is part of your company’s accounting, because there comes a time when you receive the account statement and start looking for a match with the accounting record that you have for your bank account, which is important because it is the best way to control the resources of the company and fundamentally you avoid the writing of bad checks, right?

Therefore, below you will know exactly what it is, how to do it in Excel and of course an inevitable example so that based on it you can adapt it to your company’s accounting.

Bank Reconciliation: Fundamentals

As you just read the Bank reconciliation It is a fundamental part of your company’s accounting.

  1. It all begins when you receive the account statement, since you must check if the amounts coincide with the accounting record of the bank account.
  2. You must bear in mind that many of the concepts recorded in the registry of your company within a particular month, will not be the same as the one recorded in the account statement and it is even probable that both balances do not show reality.
  3. The balance of the company and that of the bank need an adjustment to reveal the real cash balance and that is available in the checking account, so …

How to do a bank reconciliation

To keep control of the cash flow, do this:

  1. Make an adjustment of the account balance according to the correct one.

To adjust, you must take into account the sum of the deposits in transit and the result subtract the checks in transit and you will obtain the adjusted balance corresponding to the account statement.

What are deposits in transit? It is the number registered by your company but which has not been registered by the bank. Well, keep in mind that your company receives checks from other banks, then your bank will have 24 hours to process the deposits, so they are deposits that remain in transit.

But since deposits in transit are included in the accounting record of your company’s bank account, you don’t adjust them.

However, as they are not included in the account statement, you must include them in the bank reconciliation as part of an increase in the bank balance for the report to grant the amount of money correctly.

What are checks in transit? Sion those who rotate and register the company and were not withdrawn from the bank account. They are the ones who did not show up for payment when they turned around.

Since the checks that the company writes are registered in the bank account, the register of checks in transit is not adjusted because at some point the creditors will collect them at the bank and then they are subtracted from the bank account sado.

Checks in transit, as they did not arrive at the bank, cannot be seen in the statement of account and it is for this reason that you must include them in the bank reconciliation.

  1. Make an adjustment of the balance of the company’s records, subtracting the charges for banking services, bad checks with their charges and adding the interest earned, the accounts receivable by the bank and you will obtain the books with the adjusted balance as a result. .

What are the charges for banking services? They are those that the bank charges you or you can deduct for overdraft, for managing the account or when it stops a payment order for a check that the company has written.

These charges can be deducted in the statement of account without your company knowing it, so you do not need the adjustment of the balance specified in the summary because they were subtracted. However, you must include them in the bank account to adjust the balance in your records.

On the other hand, if the bank account balance has errors, it may be due to several factors such as the entry of an incorrect amount, a wrongly included transaction in the account or an omission of an operation that should be included in the account.

These errors can be corrected and then the balance of your company’s bank account will decrease or increase.

  1. Make a comparison of adjusted balances. According to the account statement and the records of your company you will have adjusted the balance, obtaining as a result that the two amounts are equal.

If you do not obtain equal amounts, repeat the whole process until you verify that the balances are equal, because those balances represent the amount of cash that the company has available when you do the bank reconciliation.

What is a bank reconciliation?

In short the Bank reconciliation Compare the accounting record of your company’s bank account with the adjustments made by the bank on that same account.

Compare the values ​​that the company registered with those that the bank provides you through the account statement that you receive every month.

Your company has an auxiliary book to record all movements in it, since the bank also does the registration and that is why it sends your company and all its clients a statement of account or bank statement.

Then it is verified with a review of the movements registered by the company, comparing them with those of the bank to determine if there is a match or otherwise find out the cause of that difference.

Since the items are recorded at different times, the most common is that the final balance of the bank never coincides with that of the accounting books of the company.

Bank reconciliation Excel

In an Excel sheet enter the name of the company, bank reconciliation and the date of the reconciliation period.

  1. Add the credit notes and subtract the debit notes.
  2. If there are no other movements that were not recorded, determine the balance to reconcile.
  3. Determine the ending balance according to the statement. With a negative sign, checks drawn and not cashed because they will reduce the balance.
  4. Add deposits in transit. When registering in the account statement, you will see an increase in the available balance and you will add up all the movements that you registered.

Bank reconciliation example

With the title bank reconciliation, enter the name of the company, the name of the bank, the current account number and the period.

Make three columns. In the first column enter the period according to the bank and in the third column enter the value.

Below in the first column enter + Deposits in transit and enter the value in the second column.

Below, enter the errors made and the value in the second column.

Below enter sub total with the value in the third column.

Below enter – checks in transit with the value in the second column.

Below enter errors made with the value in the second column.

Below enter the reconciled period according to the bank, period and the value in the third column.