ACCT 133

P5 – Bank Reconciliation

Review Notes to Assist You  

The purpose of a bank reconciliation is to reconcile or bring together the balances that you have on your books with the balances that the bank has in their records.  It serves as an external check on your cash balance.  It is one of the most important internal control features for cash.  You should reconcile your own account on a monthly basis.  (Most personal financial software programs -- like Quicken – have a reconciling feature built into it.  It's a point and click process where matching items are checked off.)

   

Basically there are five steps in performing a bank reconciliation.  These steps are summarized below in case you have forgotten:    

1. Make sure any items from the previous month have cleared the bank.  If they have, check them off.  If not, circle them.  These amounts are still reconciling items and need to be carried forward to the current month.

2. Compare the deposits per the books (or your check register) to the deposits per the bank.  If they match, then check them off.  If they don’t, then circle them.  Any unmatched items are reconciling items

3. Compare the checks per the books to the checks per the bank statement.  If they match, then check them off.  If they don’t, then circle them.  These are reconciling items

4. Insure that any debit or credit memos appearing on the bank statement are also in the accounting records.  If they are not, circle them.  These are reconciling items.  (Don't forget that bank debit and credit memos are backwards from an accounting standpoint.)

5. Any circled items or reconciling items need to be carried to the bank reconciliation format shown below.

    Bank Reconciliation Format

 

 

Bank Side                                                    Book Side                                                                          

 

 

 

Balance per Bank Statement                         Balance per Books

 

 

Add:          Deposits in Transit                           Add:  Collections/Interest                                     

 

Less:          Outstanding Checks                            Less:          NSF Checks

                                                                             Fees

+/-     Bank Errors                                                 +/-          Our Errors

 

Adjust Balance per Bank                                Adjust Balance per Books

 

 

There should be no difference between the balances if you have reconciled your account.