Bank Reconciliation: Purpose, Example, and Process

You must post the journal entries of all the adjustments made to the balance as per cash book. For example, a business has an operating account with a balance of $15,000 on July 1. During the course of the month, they write three checks for $1,000, $397, and $1,900. According to their reconciliation statement, they have a balance of $18,703, but the book balance shows a balance of $18,648.

Here are the best practices https://personal-accounting.org/es must follow while reconciling their bank statements. These items are typically service fees, overdraft fees, and interest income.

How to do a bank reconciliation

Conversely, the bank may have recorded transactions that the business may have overlooked. By comparing their own financial statements with the records they receive from the bank.

In other words, the The bank reconciliation processed balance as per bank must match with the adjusted balance as per cash book. There might be a possibility that your bank may debit incorrect amounts from your account or credit funds that you do not own. In case your bank commits errors like these, reach out to the appropriate bank officials and inquire about any debits or credits made to your account by the bank about which you are doubtful. Whether the bank related transactions are recorded properly in your books of accounts.

Healthcare and Human Services

Many bank services carry a fee, including for various account services and for electronic or expedited payments. The precise level of these fees sometimes isn’t known until they appear in companies’ bank statements, at which point they require an adjustment to a company’s books. Business owners use bank reconciliations to verify why business checks were not cashed by the intended recipient. Checks can get lost in the mail or be misplaced by the recipient and interfere with a company’s cash flow.

• After all reconciliation adjustments, the final correct cash balance captured in the company accounting records and on its balance sheet as at 30 September 20XX was $2,000.
• Therefore, while preparing a bank reconciliation statement you must account for any fees deducted by the bank from your account.
• If you use the accrual system of accounting, you might “debit” your cash account when you finish a project and the client says “the cheque is going in the mail today, I promise!
• Banks and businesses do not record transactions synchronously, so human error can occur.
• Check deposits can be a challenge for businesses at the time of reconciliation.