subject: How To Prepare A Proper Bank Reconciliation [print this page] When companies use a process to match and compare figures from their records pertaining to their accounts against those found on a bank statement it is known as bank reconciliation. Such a process should end up with the balance of the accounting ledger matching those of the balance of the bank statement. It thus becomes possible to compare a bank account record with the general ledger record and thus ascertain whether there is any adjustment to be made if a discrepancy is found in order to reconcile the bank statement with the general ledger accounts.
It is normal for a company or individual to keep a general ledger cash account which records all transactions involving its checking account and the bank will create records of the company's or individuals checking account at the time it processes the checks, deposits, service charges, and miscellaneous items. At the end of the month, or shortly after that the bank prepares a bank statement, which lists activity in the company or individual's bank account pertaining to the last month and also shows the balance remaining in the account.
When a bank statement is received, it is necessary to reconcile the amounts shown on the bank statement with the amounts in the cash account in the general ledger through a process known as reconciliation. There are many benefits to be gained from a reconciliation of the bank statement such as identification of unbooked transactions, determining outstanding items, and as a control against fraudulent transactions.
Bank reconciliation involves many checks and deposits so it can take some time to complete the reconciliation. There are also instances when the cash accounts appear in one month in the general ledger while they may appear in different months in the bank statement. This calls for adjusting the balance per bank to be true balance which should match the adjusted balance per book, when such is the case the bank statement will have been reconciled.
The process of bank reconciliation begins with adjusting the balance on the bank statement to the adjusted, true or corrected balance. This is followed by adjusting the balance in the cash account that it too is the corrected, adjusted as well as true balance. You would then need to compare the two adjusted balances. In case there appear any discrepancies, the whole process needs to be repeated until the balances match again. The final balance ought to be the true as well as correct amount of cash pertaining to the date of bank reconciliation. When discrepancies occur, or when adjustments are made, it calls for journal entries to be prepared for accommodating such adjustments that relate to the balance per books. These steps, when followed, should help companies and/or individuals get through the entire bank reconciliation process in a satisfactory manner and ensure that the balances shown in the general ledger match exactly with those contained on the bank statement.
The bank reconciliation form is readily available in the market and finding one should not pose any problem, as there are many vendors who specialize in such documents and for a few dollars one may obtain completely researched and well-formed bank reconciliation form.
