5 Bank Reconciliation Rules

Ready to learn the bank reconciliation rules? Read on.

When you’re working on a bank reconciliation statement, there are specific rules you should take to ensure accuracy.

Failure to adhere to these rules may result in an unbalanced statement or a decrease in efficiency.

Especially for beginners, the process of bank reconciliation can seem challenging.

However, by diligently following these guidelines, you can make the reconciliation process smoother and more manageable.

When I first began reconciling bank accounts at the beginning of my career, it was quite challenging for me.

I had disorganized working papers and no clear system to guide me on where to begin.

After gaining more experience, I eventually identified and established a set of rules to follow, which greatly improved the process for me.

Start with the previous bank reconciliation statement

Let’s begin with the previous bank reconciliation statement.

Many companies prefer using the adjusted balance method for bank reconciliation.

This method essentially kicks off with the unadjusted balances, which include the unadjusted bank balance and the unadjusted book balance.

Example of a bank reconciliation template for download

The starting point for reconciling your bank statement is the unadjusted bank balance, which should match the beginning balance stated in the current month’s bank statement.

In the given scenario, if you’re reconciling the month of September, the $130,000 unadjusted bank balance should align with the starting balance in the September bank statement.

Likewise, when reconciling your cash in the bank account for September, the $100,000 unadjusted book balance should correspond to the initial book balance for the same month.

This ensures consistency between your records and the bank statement, making the reconciliation process smoother.

If the initial unadjusted bank balance and unadjusted book balance from the last reconciliation don’t match up with your current bank statement and book beginning balance, there might be an issue with the prior reconciliation.

This discrepancy could carry over and lead to an imbalance in your September bank reconciliation statement.

It’s essential to address and rectify any errors to ensure accurate financial records.

Use the correct bank reconciliation template

It’s crucial to highlight the importance of using the right bank reconciliation template to align your cash book balance with your bank balance.

If you don’t have a clear understanding of how a bank reconciliation statement is structured, ensuring that both sets of records are in harmony becomes challenging.

Take a look at the provided above example to get a better grasp of what a bank reconciliation template entails and how it can help you achieve balance between your financial records.

Reconcile deposits first

To ensure a smooth bank reconciliation process, it’s important to follow another key rule: start by reconciling deposits.

Begin with the unadjusted bank balance and include all the credits recorded by the bank.

Simultaneously, consider the unadjusted book balance and incorporate all debits from the books, reflecting all the deposits made during the specific period under review.

This approach helps align the two sets of records and facilitates a more accurate reconciliation.

Bank BalanceBook Balance
Unadjusted Balances130,000100,000
Add: deposits this period20,00060,000
Unadjusted Balances after deposits150,000160,000

Alright, let’s break it down. When you’re reconciling deposits, keep your attention solely on that task.

Forget about outstanding checks for now.

Your goal is to reconcile all the deposits made during that specific period.

Take into account the items from the previous bank reconciliation statement to ensure everything lines up correctly.

This focused approach helps streamline the process and ensures accuracy in your reconciliation efforts.

our objective is to identify and address all the factors contributing to the $10,000 variance between the initial bank balance and the initial book balance.

Ensure that you transfer any outstanding reconciling items from the previous bank reconciliation statement that are unrelated to deposits.

Reconcile Disbursements Next

Bank BalanceBook Balance
Unadjusted Balances130,000100,000
Add: deposits this period20,00060,000
Unadjusted Balances after deposits150,000160,000
Less: Disbursements20,00050,000
Unadjusted Balances after Disbursements130,000110,000

After you’ve reconciled all your payments, the remaining balance in your account is what you’ll see in your upcoming bank reconciliation statement.

Your task is to identify the items that need reconciling. Your task is to identify the items that need reconciling in this scenario, including checks you’ve written that have not been processed by the bank yet, commonly known as outstanding checks.

Adjusted balances should match

Bank BalanceBook Balance
Unadjusted Balances130,000100,000
Add: deposits this period20,00060,000
Unadjusted Balances after deposits150,000160,000
Less: Disbursements(20,000)(50,000)
Unadjusted Balances after Disbursements130,000110,000
Outstanding checks20,000
Adjusted Balances110,000110,000

The main thing to remember is that the adjusted balances in both the bank statement and your records should match up for a successful bank reconciliation.

All the adjustments you make during the reconciliation process should ensure that both the bank and your book balance align properly.

This way, you ensure accuracy and consistency between your financial records and the bank statement.

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