Today, you’ll learn why bank recon does not match the General Ledger.
Written By Kevin Mil - Author/Founder
Why doesn’t my bank reconciliation match my balance sheet?
There are many reasons why bank reconciliation does not match the general ledger, including errors in bank reconciliation, unrecorded transactions, and bank errors.
In this post, we will break down these factors to provide a clearer understanding.
When I started my first job assignment to prepare a bank reconciliation statement, I had no idea where to begin.
As a fresh graduate at the time, I found myself revisiting my college books to review the proper procedures for bank reconciliation.
After completing my reconciliation, I was surprised by the results, prompting me to review my books again.
The adjusted book balance of my bank reconciliation differed from the Cash in Bank balance in the general ledger.
What could have happened?
I followed the instructions in my accounting books, which grabbed my attention at the time.
However, I felt pressured as I wondered how I could complete this bank reconciliation.
Ideal Situation
In an ideal scenario, the unadjusted balance and the Cash in Bank in the General Ledger should match, assuming there is only one bank account.
However, if you have multiple bank accounts, you must obtain the subsidiary ledger from the General Ledger.
This is because a Cash in Bank General Ledger may consist of numerous bank accounts, each represented by a separate subsidiary ledger.
Reasons
The adjusted balance in a bank reconciliation may not always match the general ledger for a few reasons:
1. Errors in Bank Reconciliation
If there are errors in your bank reconciliation, it is likely that the bank reconciliation does not match the General Ledger.
This discrepancy occurs because mistakes were made during the preparation of the bank reconciliation.
2. Unrecorded Transactions
After you prepare the bank reconciliation for the month following the one you are reconciling, the accounting period for the month you are reconciling has already closed.
This is because you receive the bank statement in the subsequent month, so any unrecorded transactions are not yet reflected in the books.
Consequently, all reconciling items are likely recorded in the next month(s).
3. Unknown Bank Errors
Unknown bank errors can also cause a mismatch between the bank reconciliation and the general ledger balance.
If you are unaware of a bank error, you are likely to include it as an item to reconcile in your books.
However, because you don’t understand the nature of the error, you cannot accurately record it in the books.
As a result, this discrepancy leads to a mismatch between the bank reconciliation and the general ledger balance.
4. Partial adjustments of reconciling items
If not all book reconciling items are recorded, the bank reconciliation usually does not match the general ledger.
This is because partial recording of adjusting entries will result in a mismatch.
5. Multiple Bank Accounts
We have mentioned before that if there is more than one bank account, the bank reconciliation may not match the general ledger.
This is because the general ledger is a collection of accounts in the form of a Subsidiary Ledger.
Consequently, discrepancies can arise between the bank reconciliation and the general ledger when multiple accounts are involved.