3 Types of Bank Reconciliation

Today, you’ll learn about the types of bank reconciliation.

Bank reconciliation is an essential process that helps businesses and individuals ensure the accuracy of their financial records by comparing them with the records provided by their bank.

This process helps you identify any discrepancies, errors, or fraudulent activities and is crucial for maintaining your financial integrity.

In this post, we will explore three types of bank reconciliation: bank-to-book reconciliation, book-to-bank reconciliation, and the adjusted method.

1. Bank-to-Book Reconciliation

In bank-to-book reconciliation, also known as the “bank statement method,” you match the transactions in your bank statement with those in your organization’s books.

This type of reconciliation usually starts with the ending balance per bank statement and compares it to the ending balance in your organization’s records.

It considers various factors such as deposits, checks issued, fees, and other bank activity.

The goal is to identify any discrepancies between the two sets of records and make the necessary adjustments.

Procedure for Bank-to-Book Reconciliation

To perform bank-to-book reconciliation, follow these steps:

Step 1: Obtain your latest bank statement.

Step 2: Compare the ending balance per bank statement with the ending balance in your organization’s books.

Step 3: Identify any transactions recorded in the bank statement that are not recorded in your organization’s books (outstanding checks, deposits in transit, and bank charges/credits).

Step 4: Adjust your bank statement balance to match the organization’s records balance by adding or subtracting the appropriate transactions.

Step 5: Reconcile all outstanding items, ensuring that they are properly reflected in both your records.

2. Book-to-Bank Reconciliation

In book-to-bank reconciliation, also known as the “book statement method,” you match the transactions recorded in your organization’s books with those reported in the bank statement.

This type of reconciliation usually starts with the ending balance in your organization’s records and compares it to the ending balance per the bank statement.

The purpose is to identify any discrepancies between the two records and make the necessary adjustments accordingly.

Procedure for Book-to-Bank Reconciliation

To perform book-to-bank reconciliation, follow these steps:

Step 1: Gather your financial records, including the general ledger and accounting records.

Step 2: Compare the ending balance in your organization’s records with the ending balance per the bank statement.

Step 3: Identify any transactions recorded in your organization’s books that are not reflected in the bank statement (outstanding deposits, outstanding checks, and other adjustments).

Step 4: Adjust your organization’s records to match the bank statement by adding or subtracting the appropriate transactions.

Step 5: Reconcile all outstanding items, ensuring that they are accurately reflected in both your records.

3. Adjusted Method Reconciliation

The adjusted method reconciliation is a combination of bank-to-book reconciliation and book-to-bank reconciliation.

You start with either the bank statement or your organization’s records and reconcile the transactions until both records match.

This method is useful when calculating your actual cash in bank balance.

Procedure for Adjusted Method Reconciliation

To perform adjusted method reconciliation, follow these steps:

Step 1: Choose either the bank statement or your organization’s records as your starting point.

Step 2: Perform the appropriate reconciliation method (bank to book or book to bank) using your chosen starting point.

Step 3: Make the necessary adjustments based on any differences identified in the first reconciliation step.

Step 4: Repeat the reconciliation process using the adjusted records.

Step 5: Ensure that all transactions and adjustments are accurately reflected in both the bank statement and your organization’s records.

Jason John Wethe
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