How to Prepare a Bank Reconciliation: Accounting

Bank reconciliation is a process used by businesses to ensure that their bank statement matches their accounting records.

Here’s a step-by-step guide on how to prepare a bank reconciliation:

1. Gather Information

Collect the bank statement for the period you’re reconciling.

Access your company’s accounting records, including the cash account ledger.

2. Compare Dates

Ensure that the transactions on the bank statement correspond to the same period as your accounting records.

3. List Outstanding Checks and Deposits

Identify any outstanding checks (issued but not yet cleared by the bank) and outstanding deposits (made but not yet reflected in the bank statement).

4. Adjust for Bank Charges and Interest

Check for any bank fees, charges, or interest earned that are not yet recorded in your books.

Make adjustments accordingly.

5. Compare Amounts

Go through each transaction on the bank statement and compare it with the corresponding entry in your accounting records.

Mark off each transaction as you verify it.

6. Note Discrepancies

If you find any discrepancies (e.g., missing transactions, different amounts), investigate and note the reasons for the differences.

7. Reconcile Cash Balances

Adjust your accounting records for any outstanding checks or deposits, as well as any discrepancies found.

Make sure your adjusted book balance matches the ending balance on the bank statement.

8. Prepare Reconciliation Statement

Create a reconciliation statement summarizing the adjustments made and explaining any differences between your records and the bank statement.

9. Update Accounting Records

Make necessary adjustments in your accounting records based on the reconciliation.

This may include recording outstanding checks or deposits, correcting errors, or adding missing transactions.

10. Review and Document

Review the reconciliation statement and supporting documentation.

Document the reconciliation process and any actions taken to resolve discrepancies.

11. Investigate Discrepancies

If there are unresolved discrepancies, investigate further to identify and rectify any errors or omissions.

This may involve contacting the bank or reviewing additional records.

12. Repeat Regularly

Perform bank reconciliations regularly, ideally every month, to ensure ongoing accuracy in your financial records.

Jason John Wethe
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