Ready to learn most uncleared transactions in a bank reconciliation?
Read on.
Written By Kevin Mil - Author/Founder
What does it mean when a transaction is uncleared?
When preparing a bank reconciliation statement, focusing on the most common uncleared transactions can help streamline the process.
Knowing which items typically remain uncleared allows you to reconcile your accounts quickly and efficiently.
The most frequent culprits include outstanding checks that have been issued but not yet cashed, deposits in transit that have been recorded in your books but not yet processed by the bank, and bank errors or omissions, such as incorrect transaction amounts or missing transactions.
With this foundation of the most common uncleared transactions encountered during bank reconciliation, you’re well on your way.
To expand your knowledge further and learn additional tips and tricks for tackling reconciliations more efficiently and confidently, continue exploring the expert insights in the resources below.
Here are the most uncleared transactions in bank reconciliation:
1. Outstanding Checks – Uncleared Checks
Outstanding checks are straightforward to identify because you can match the check numbers between your accounting records and the bank statement.
The PIVOT method in Excel can also be used to expedite this process.
Our website provides a helpful tutorial that walks through the steps of using PIVOT tables to streamline reconciling outstanding checks.
2. Deposits in Transit – Could Be Difficult
Reconciling deposits in transit can be a challenging task due to the lack of common references with the bank statement.
However, by utilizing the pivot table feature in Excel, you can effectively reconcile these transactions.
To accomplish this, it’s essential to understand the necessary steps involved.
One effective approach is to incorporate batch numbers in your accounting records and encode those batch numbers in the bank statement, assuming you have downloaded your bank statements in CSV format.
3. Online Fund Transfers
Online fund transfers can sometimes create challenges during bank reconciliation.
One such issue arises when a sender deposits money into your company’s bank account without prior communication.
In these cases, it becomes difficult to record the transfer accurately due to the lack of information.
To address this problem, a temporary solution is to record these unidentified transactions in other payable accounts until they can be properly identified.
The appropriate journal entry would be to debit Cash in Bank and credit Other Payable.
It is crucial to include complete details in your journal entry for future reference, as this will facilitate the reconciliation process once the transaction is identified.
4. Fees and Charges in Bank Statements
Fees and charges in bank statements are simple to spot because they are usually marked with a DM code.
Recording these fees and charges in the books as bank charges is straightforward.
However, to ensure the transactions are properly supported, it is important to obtain the necessary documents from the bank.
This step verifies that the fees and charges are indeed authorized transactions.
5. Errors and Miscalculations in Recording
Errors can occur when recording bank transactions in your accounting records, often due to overstatements or understatements of amounts.
While there’s no perfect formula to eliminate these mistakes, you can improve the review process for accounting entries prior to approval.
It’s important to remember that both your accountant and your company’s banks can make mistakes.
One effective way to identify errors and miscalculations in your records is by using PIVOT tables in Excel, similar to how you would track outstanding checks.
If you’re interested in learning more about this technique, our website offers a helpful tutorial on the subject.
6. Unrecorded transactions
Unrecorded transactions can pose a challenge when performing bank reconciliation.
Spotting these transactions is made easier using the PIVOT table, but the real difficulty arises when creating the bank reconciliation report.
The question of who to contact regarding unrecorded check disbursements and deposits becomes crucial.
For remote workers, sending the report to their employer is a straightforward process.
However, those working under an accountant must report directly to them, which can lead to complications if the unrecorded check disbursements are unauthorized.
While this issue extends beyond the scope of this post, it is important to acknowledge its potential impact on the bank reconciliation process.
7. Timing Differences Between Records
Timing differences can also remain unreconciled in a bank reconciliation.
These differences can only be cleared if both your accounting office and the bank have recorded the transaction.
For instance, interest income is typically recorded in the following month.
As a result, your bank reconciliation should normally include this interest income since it will be recorded in the subsequent month.
However, if you are reconciling daily because you have access to online banking, then these timing differences can be eliminated altogether.
Reconciling more frequently and having real-time access to banking information, you can ensure that your records and the bank’s records are always in sync, thus avoiding any discrepancies caused by timing differences.