16+ Sample Bank Reconciliation Statements

What Is a Bank Reconciliation Statement?

A corporation or individual will compile a bank reconciliation statement, a summary of banking and business activity, to compare the balance in their cash records to the balance in their bank statements. This assertion explains the causes of any differences between the two. Throughout its financial periods, a business may prepare a bank reconciliation statement whenever it sees fit. The report lists all transactions involving a bank account for a given time, including deposits, withdrawals, and other activities. A bank reconciliation statement is a practical financial internal control instrument to fight fraud.

Benefits of Bank Reconciliation Statement

In bank reconciliation, the bank statement balance and the book bank account balance in the client’s books of accounts are reconciled, resulting in a tally of the two credits, where the adjusted bank balance should equal the adjusted book bank balance. It involves a structured process of preparation in which forms containing pre-printed items should omit omission errors and can be found on the back of physical copies of your monthly bank statement, simplifying the entire process. The following are the pros of bank reconciliation:

It ensures that accounts are in excellent standing: Keeping your account in a good place through bank reconciliation reduces the likelihood of overdrawing your account, which is defined as withdrawing or attempting to withdraw more money than the report contains. Remember that stretching your account can negatively affect your credit score and result in bank fees. Although some financial institutions offer overdraft protection, most would charge you or your business a fee to utilize it. And if you do not have such security on your account, the consequences will be even worse.It discourages larceny: As you compare your bank book’s transactions with the institution’s financial transactions, you can identify transactions recorded by the institution but not by you. As you can see, documenting bank fees is standard practice during reconciliation, although you may still need to register a transaction. By conducting a thorough examination of the available original documents, these discrepancies will be uncovered. Specifically, this will reveal unauthorized attempts to take money from your account by initiating bank transactions.It will keep errors at bay: You will know that a bank is trustworthy if it implements procedures to prevent mistakes in your account. However, blunders occur, with simple entry errors being the most common. However, banks can rectify these errors when you point them out after completing your reconciliation.It aids in detecting accounting errors: You can detect common accounting errors, such as double payments, addition and subtraction mistakes, missed payments, and missing checks through reconciliation. For instance, if you erroneously marked an invoice as “paid” on your general ledger, bank reconciliation can reveal that you neglected to write the check. If your bank made an error in your favor, you may be required to refund the money even if you have already paid it.It obtains precise equilibrium: A bank reconciliation will show which cash transactions have been completed and which still require to be paid by the bank. The most frequent type of transaction that would consistently be available at the end of the statement period is a check, although if you deposited the end of the month, the bank might still need to clear it as of the statement’s closing date.

Tips for an Efficient Bank Reconciliation

A bank reconciliation compares the changes made to a company’s bank accounts by the bank with the accounting records that the company keeps about those accounts. Although it is a vital process that businesses must carry out, it can also be highly time-consuming and unpleasant. Here, we advise how to speed up and simplify this procedure.

1. Information and Documentation

It is essential to have all appropriate data and documentation readily available. As with a jigsaw puzzle, if you want to identify which pieces are missing, incorrect, or in the wrong position, you need as many pieces as possible; this will give you a better overall perspective. In addition, if a portion of the information has yet to be recorded before beginning the procedure, you must make multiple attempts to complete it, increasing the required time. Therefore, you must, if necessary, request the essential documentation from the appropriate parties. For instance, receipts for salespeople’s travel expense reports may be lacking, which must be located and recorded.

2. Don’t Overlook the Till

Bank reconciliation will be significantly easier if cash registers are included in the company’s finances. Performing a regular triple reconciliation using actual cash, a book balance, and the accounting balance is advisable. Thus, you can reduce the likelihood of errors occurring. In addition, it is advisable to commence the bank reconciliation by checking the previous month’s closing balance and, if necessary, even further back. This is beneficial if a transaction was accounted for before reaching the last total. Thus, if an error is discovered, it will not be necessary to examine each object individually; instead, we can explore sections to determine the month in which the discrepancy occurs.

3. Banks Also Make Errors

Even while it is uncommon, there is at least a chance that the bank erred. They might deposit an inaccurate payment or debit an incorrect amount from our account; if we have many accounts with the same bank, they might mistakenly debit or deposit the wrong account, and so on. Because of this, consult your bank if you find a mistake for which you can’t find an explanation or have any questions. The most current data on the digit of FDIC-insured banks on the “Problem Bank” list is currently accessible for the year-end 2022. The FDIC’s statistics show that the number of issue banks decreased further, reaching 39 by the end of 2022.

4. Reconciliation

Putting the discrepancy as a reconciling item and forgetting about it is a straightforward and enticing solution. However, the disparity will still exist; therefore, this is not a real solution. If they accumulate excessively, the bank reconciliation will become irrelevant because the accounts will no longer reflect reality, and the resulting confusion will become increasingly difficult to resolve. As indicated in the first section, we must request account balances, invoices, and receipts that we have yet to receive to ensure that we have all the necessary data and documentation and that the books are current.

5. Automate the Process

As you likely already know, paper-based administration is always more time-consuming and error-prone than computerized administration of the same tasks. The same holds for the bank reconciliation procedure. Automating this procedure or a piece to make it more efficient and manageable is possible.

How to Prepare a Bank Reconciliation

Typically, you reconcile your bank statements at the end of each month when your financial institution sends you your information. The bank statement of a business itemizes the cash and other deposits made to the company’s checking account. It also includes fees such as account maintenance costs. This is the statement required to initiate the procedure of bank reconciliation. Then, how does one perform a bank reconciliation? Here’s how it works:

1. Equalize the Deposits

After receiving a bank statement, the first step is to compare deposits. Compare the list of issued checks and deposits in the business’s records with the corresponding information on the report. Compare the amount of each deposit documented in the debit queue of your cashbook with the amount recorded on the credit side of your bank statement. Then, correspond the credit side of the bank record to the debit side of the bank statement. Mark the item in both documents and identify any checks or deposits that remain uncashed or are in transit.

2. Make the Adjustments to the Bank Statement

The office accounting records must be utilized to adjust the bank statement. Using the cash balance displayed on the report, add back any “in transit” deposits. These quantities have been received and recorded by a company but have yet to be recorded by the bank. The next step is to deduct checks that remain unpaid. These checks have been written and recorded in the currency account of a business but still need to clear the bank. They must be added to the adjusted balance in this instance. When checks are written at the end of the month, and the bank fails to record the transaction in time for the monthly statement, outstanding bills occur. Credit card companies and institutions request these statements to verify borrower applications. Applicants must provide bank statements for any mortgage agreements,  loan agreements, or financial assistance as proof of income or employment.

3. Adjust the Cash Account Balance

It’s time to update the business account’s cash balance. A company’s records must also account for and record the bank’s additional fees and interest. Add the amount of notes due and any interest earned. You must exclude recurring service costs, overdraft fees, returned check charges, and accounting mistakes. As you balance both sides, this should increase or reduce the cash account in the books.

4. Compare the Balances

Here is where everything needs to balance and check out. The company’s ending cash balance and the adjusted bank balance should be equal after reconciliation. You must rerun the bank reconciliation if the ending credits are different. A business must create journal report entries for the book modifications once the ratios are similar. A bank reconciliation statement is made at this point. All adjustments to the cash balances for each month are shown in this statement. Additionally, auditors utilize it to carry out a company’s year-end audit.

FAQs

What is the importance of bank reconciliation in financial reporting?

Bank reconciliation is crucial for gaining detailed visibility into cash availability, accurate reporting, fraud detection, a quicker financial close, and streamlined audit proposals. Regular bank reconciliations can assist businesses in identifying any discrepancies in their bank statements and taking immediate corrective action. Financial reporting aims to monitor, analyze, and report your company’s income. This enables you and any investors to make informed business management decisions. These reports analyze resource utilization and cash flow statements to evaluate an institution’s financial condition.

What are the duties of a reconciliation?

Ensures accuracy of financial balance sheet accounts and bank reconciliations; verifies legal and statutory compliance of deductions and reports on controls and processes; and Identifies and describes areas where systemic problems and inefficiencies exist.

What is cash reconciliation?

Cash reconciliation in accounting is aligning journal entries to bank statements. The primary objective of cash reconciliation is to ensure that your business’s documented balance and your bank statement’s recorded balance are identical.

Bank reconciliation statements are valuable for detecting mistakes, omissions, and fraud. When performed frequently, they aid businesses in preventing fraud and preventing errors from compounding. Additionally, accounting software permits companies to perform bank reconciliations more regularly. It makes the process simpler and error-free overall. The bank transactions are automatically imported, allowing the staff to match and categorize many trades with a single click.