Bank Reconciliation Template Free Download

Bank reconciliation is the process of comparing accounting records to a bank statement to identify differences and make adjustments or corrections. In the case of personal bank accounts, like checking accounts, this is the process of comparing your monthly bank statement against your personal records to make sure they match. Many banks allow you to opt for fee-free electronic bank statements delivered to your email, but your bank may mail paper bank statements for a fee.

For more resources, check out our business templates library to download numerous free Excel modeling, PowerPoint presentation, and Word document templates. Kevin Payne is a personal finance and travel writer who covers credit cards, banking, and other personal finance topics. In addition to Forbes, his work has been featured by Bankrate, Fox Business, Slick Deals, and more. He is the budgeting and family travel enthusiast behind Family Money Adventure.

  1. The balance recorded in your books (again, the cash account) and the balance in your bank account will rarely ever be exactly the same, even if you keep meticulous books.
  2. Reconciliation is the process of comparing two different records.
  3. Bank reconciliation is a simple and invaluable process to help manage cash flows.
  4. Mary Girsch-Bock is the expert on accounting software and payroll software for The Ascent.

Companies must regularly carry out this exercise to maintain financial transparency in the account records. Bank reconciliation is the process of comparing the balance as per the cash book with the balance as per the passbook (bank statement). The very purpose of reconciling the bank statement with your business’ books of accounts is to identify any differences between the balance of the two accounts. Interest is automatically deposited into a bank account after a certain period of time. So the company’s accountant prepares an entry increasing the cash currently shown in the financial records. After adjustments are made, the book balance should equal the ending balance of the bank account.

Cheques Paid into the Bank But Not Yet Collected or Credited

Many business owners choose to create financial reports for set periods of time, for example, per month, quarter or year. Since the Adjusted balance per BANK of $1,719 is equal to Adjusted balance per BOOKS of $1,719, the bank statement of June 30 has been reconciled. Next, we will prepare a bank reconciliation for a hypothetical company by using transactions that are commonly encountered. Some businesses, which have money entering and leaving their accounts multiple times every day, will reconcile on a daily basis. There’s nothing harmful about outstanding checks/withdrawals or outstanding deposits/receipts, so long as you keep track of them.

The above case presents preparing a bank reconciliation statement starting with positive bank balances. As mentioned above, debit balance as per the cash book refers to the deposits held in the bank. This balance exists when the deposits prospective freelance accountant made by your business at your bank are more than the withdrawals. For instance, the bank charged your business $30 in service fees, but it also paid you $5 in interest. Below is an example of a completed bank reconciliation statement.

Bank Reconciliations: Everything You Need to Know

Then when you do your bank reconciliation a month later, you realize that cheque never came, and the money isn’t in your books (even though your bookkeeping shows you got paid). You only need to reconcile bank statements if you use the accrual method of accounting. This is to confirm that all uncleared bank transactions you recorded actually went through. Adjust the balance on the bank statements to the corrected balance.

Therefore, while preparing a bank reconciliation statement you must account for any fees deducted by the bank from your account. When you prepare the bank reconciliation statement for the month of November as on November 30, 2019, https://www.wave-accounting.net/ the cheque issued on November 30 is unlikely to be cashed by the bank. Ensure that you take into account all the deposits as well as the withdrawals posted to an account in order to prepare the bank reconciliation statement.

For each of the adjustments shown on the Balance per BOOKS side of the bank reconciliation, a journalentry is required. Each journal entry will affect at least two accounts, one of which is the company’sgeneral ledger Cash account. The balance recorded in your books (again, the cash account) and the balance in your bank account will rarely ever be exactly the same, even if you keep meticulous books. We’ll go over each step of the bank reconciliation process in more detail, but first—are your books up to date? If you’ve fallen behind on your bookkeeping, use our catch up bookkeeping guide to get back on track (or hire us to do your catch up bookkeeping for you). When they draw money from your account to pay for a business expense, they could take more than they record on the books.

However, with today’s online banking a company can prepare a bank reconciliation throughout the month (as well as at the end of the month). This allows the company to verify its checking account balance more frequently and to make any necessary corrections much sooner. A company prepares a bank reconciliation statement to compare the balance in its accounting records with its bank account balance. The statement shows reasons for any discrepancies between the two. A bank reconciliation statement is a valuable internal tool that can affect tax and financial reporting and detect errors and intentional fraud. After recording the journal entries for the company’s book adjustments, a bank reconciliation statement should be produced to reflect all the changes to cash balances for each month.

Hopefully you never lose any sleep worrying about fraud—but reconciling bank statements is one way you can make sure it isn’t happening. The business needs to identify the reasons for the discrepancy and reconcile the differences. This is done to confirm every item is accounted for and the ending balances match. The deposit could have been received after the cutoff date for the monthly statement release.

Step two: Adjusting your balances

Let’s help Emily analyze the difference between the company’s financial records and the bank statement. As you know, the balances in asset accounts are increased with a debit entry. This bank reconciliation statement template shows you how to calculate the adjusted cash balance using the bank statement and a company’s accounting record. As with deposits, take time to compare your personal records to the bank statement to ensure that every withdrawal, big or small, is accounted for on both records. If you’re missing transactions in your personal records, add them and deduct the amount from your balance. If you’re finding withdrawals that aren’t listed on the bank statement, do some investigation.

When you’re completing a bank reconciliation, the biggest difference between the bank balance and the G/L balance is outstanding checks. It’s common for your bank statement to have a higher ending balance than your G/L account shows. While it may be tempting to assume you have more money in the bank than you think, it’s a safe bet that the difference is checks and other payments made that have not yet hit the bank. Nowadays, many companies use specialized accounting software in bank reconciliation to reduce the amount of work and adjustments required and to enable real-time updates. Recall that the adjustments to the balance per BOOKS will require accounting entries for the items to be posted to the company’s general ledger accounts.

It is also necessary to contact the bank immediately for any bank errors that were discovered in order for the bank account to be corrected. In this section we will prepare a June 30 bank reconciliation for Lee Corp using the five steps discussed above. More specifically, you’re looking to see if the “ending balance” of these two accounts are the same over a particular period (say, for the month of February).

Compare your personal transaction records to your most recent bank statement. First, make sure that all of the deposits listed on your bank statement are recorded in your personal record. If not, add the missing deposits to your records and your total account balance. To quickly identify and address errors, reconciling bank statements should be done by companies or individuals at least monthly. They also can be done as frequently as statements are generated, such as daily or weekly. Bank reconciliation statements compare transactions from financial records with those on a bank statement.

Step #1: Match Each Item On the Bank Statement With Every Item in Your Company’s Cash Account

In these cases, journal entries record any adjustment to the book’s balance. After fee and interest adjustments are made, the book balance should equal the ending balance of the bank account. A bank reconciliation statement is a document that compares the cash balance on a company’s balance sheet to the corresponding amount on its bank statement.

If it’s a missing check withdrawal, it’s possible that it hasn’t been cashed yet or wasn’t cashed by the statement deadline. How you choose to perform a bank reconciliation depends on how you track your money. Some people rely on accounting software or mobile apps to track financial transactions and reconcile banking activity. Others use a paper checkbook, and balance it each month, to keep a record of any written checks and other transactions. You can also opt to use a simple notebook or spreadsheet for recording your transactions.

All of this can be done by using online accounting software like QuickBooks. In case you are not using accounting software, you can use Excel to record such items. Such errors are committed while recording the transactions in the cash book. As a result, the balance as per the cash book differs from the passbook. As a result, the bank debits the amount against such dishonored cheques or bills of exchange to your bank account. When your business issues a cheque to its suppliers or creditors, such amounts are immediately recorded on the credit side of your cash book.

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