Want to learn the types of transactions a bank reconciliation looks at? Read on.
In this article, we will explore the different types of transactions that you need to examine during a bank reconciliation.
By understanding these transaction types, you will grasp the significance of this crucial financial procedure and ensure the accuracy of your company’s financial records.
To begin your bank reconciliation, you should focus on deposits.
Take a moment to review the deposits made into your bank account. Examine customer payments, electronic transfers, and any other forms of money added to your account.
By comparing your internal records with the bank’s data, you can identify any discrepancies related to unrecorded deposits or posting errors that require rectification.
2. Checks and Withdrawals
Now, turn your attention to checks and withdrawals.
As the business owner, you need to review the checks you have written and the withdrawals made on behalf of your company.
Ensure that all outgoing payments are accurately recorded. Look out for any unauthorized or fraudulent transactions that may have occurred.
Discrepancies can arise due to improper recording, missing checks, or even fraudulent alterations.
3. Bank Service charges
Don’t forget to examine bank service charges associated with your accounts.
These charges may include monthly account maintenance fees, overdraft charges, and transaction fees.
Take the time to reconcile these charges by comparing them with your records.
Make sure that all fees are accounted for accurately, and address any discrepancies that arise during this process.
4. Interest Earned
Take a closer look at the interest earned on your company’s bank account.
Many banks provide interest on deposit accounts.
As the business owner, it is your responsibility to ensure that this income is correctly recorded.
Compare the bank’s interest statements with your records.
Identify any discrepancies and make necessary adjustments to ensure accurate financial reporting.
5. Direct Debits and Automatic Payments
As part of your bank reconciliation, examine the direct debits and automatic payments you have set up to pay recurring expenses promptly.
Cross-reference these transactions with your company’s records.
This ensures that all authorized payments have been correctly recorded and eliminates any possibility of unauthorized or erroneous transactions.
6. Returned Checks and Bounced Payments
Pay attention to returned checks and bounced payments.
Occasionally, you may receive payments that are subsequently rejected by the bank due to insufficient funds, account closure, or other issues.
During your bank reconciliation, carefully review these returned checks and make necessary adjustments to reconcile the discrepancies promptly.
It is crucial to accurately reflect your company’s financial position by identifying any returned items.
7. Electronic Transfers and Wire Payments
Examine your electronic transfers and wire payments.
These transactions may include online banking transfers or wire transfer services.
Compare these transactions with both your company’s records and the bank’s statements.
Identify any discrepancies related to timing, amounts, or omitted transactions.
Make adjustments to ensure accurate financial records and reporting.
8. Unmatched Transactions
During your bank reconciliation, be on the lookout for unmatched transactions.
These are transactions that appear in either your company’s records or the bank’s statements, but not both.
Such discrepancies may occur due to data entry errors, timing differences, or other factors.
It is crucial to identify and rectify these discrepancies promptly to maintain accurate and complete records.
9. Outstanding Deposits and Withdrawals
Finally, review outstanding deposits and withdrawals.
These are transactions that have been recorded by your company but have not yet been reflected in the bank’s records, usually due to timing differences.
Ensure that these transactions are accurately accounted for by identifying and addressing any inconsistencies between your records and the bank’s statements.