10 Bank Reconciliation Rules

Ready to learn the bank reconciliation rules? Read on.

Now that you have mastered the functions of bank reconciliations, it’s time to dive into the rules that govern this important process.

Bank reconciliation rules provide guidance and structure to ensure accuracy and consistency in reconciling your accounts. Let’s explore these rules together.

This is for your adjusted method of bank reconciliation.

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Bank Balance Side

Begin with the Ending Balance

The first rule of bank reconciliation is to start with the ending balance shown on your bank statement. This is the amount the bank claims you have in your account at the end of the statement period.

Add Deposits in Transit

Next, you need to account for any deposits made but not yet reflected on the bank statement. These are called deposits in transit.

Go through your records and identify any deposits that have been made but are not yet reflected on the bank statement. Add these deposits to the ending balance.

Deduct Outstanding Checks

Now it’s time to deduct any outstanding checks from the unadjusted balance.

Outstanding checks refer to checks you have issued but have not yet cleared the bank.

Review your records and identify any checks that have been issued but are still outstanding. Deduct these check amounts from the adjusted balance.

Book Balance Side

1. Account for Bank Fees and Service Charges

Check your bank statement for any bank fees or service charges that have been deducted.

These charges are typically listed separately from transactions.

Make sure to deduct these fees from the unadjusted balance.

2. Reconcile Miscellaneous Transactions

Next, carefully review your records for any miscellaneous transactions such as bank errors, interest earned, or other adjustments. Adjust the account balance based on these transactions.

3. Record Adjusted Balance

After making all the necessary adjustments, record the adjusted balance.

This is the amount that should match your records.

More Important Rules:

4. Compare Records with Bank Statement

Now comes the important step of comparing your records with the bank statement.

Go through each transaction listed on the statement and compare it to your records.

It’s crucial to match every transaction accurately, ensuring the amounts and dates align.

5. Identify Discrepancies

As you compare your records to the bank statement, you may come across discrepancies.

These could be errors, missing transactions, duplicated entries, or any other inconsistencies between your records and the bank’s.

It’s essential to identify and investigate these discrepancies.

6. Investigate Discrepancies

Once you have identified discrepancies, it’s time to investigate their cause.

Determine if the errors are on your end, the bank’s end, or if they require additional research.

Dig deeper into the details, consult supporting documents if needed, and rectify any errors promptly.

7. Adjust Records as Needed

Based on the results of your investigation, make the necessary adjustments to your records.

Correct any errors, add missing transactions, or remove duplicated entries.

Ensure that your records accurately reflect the correct information.

8. Reconcile Until All Transactions Are Accounted For

Continue the reconciliation process until every transaction on the bank statement has been accounted for and accurately matched to your records.

This includes deposits, withdrawals, fees, and any other transactions.

The goal is to have a balanced and reconciled account.

9. Document Reconciliation

It’s crucial to document your bank reconciliation process thoroughly.

Keep a record or summary of the steps taken, the adjustments made, and any discrepancies found.

This documentation will serve as a valuable reference in the future and provide transparency in your financial records.

10. Regularly Reconcile Your Accounts

Finally, make it a habit to regularly reconcile your bank accounts.

Consistent and timely reconciliations help ensure that your financial records are up-to-date, accurate, and in line with the bank’s records.

This practice promotes transparency, accuracy, and better financial management.

Jason John Wethe
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