Procedures for Conducting a Bank Reconciliation

Bank reconciliation is a process used by businesses and individuals to ensure that their bank account records match the transactions reported by their bank. This process helps identify discrepancies and errors in financial records. Contact our accounting firm in Johor Bahru anytime you need help understanding the bank reconciliation. Here are the procedures for performing a bank reconciliation:

Gather necessary documents:

• Obtain your bank statement: This is the monthly statement provided by your bank that lists all the transactions in your account for a specific period.
• Access your accounting records: Gather your records of all the transactions you’ve made in your bank account during the same period.

Compare beginning balances:

• Verify that the beginning balance on your bank statement matches the beginning balance in your accounting records.

Compare deposits and withdrawals:

• List all funds deposited into your bank account during the reporting period, including checks, cash, and electronic transfers.
• Compare these deposits with the deposits and withdrawals recorded in your accounting (Also see Management Accounting – Budgeting and Forecasting Techniques) records to ensure they match.

Identify and record outstanding transactions:

• Examine your bank account for any outstanding checks or deposits that are yet to be processed. These are transactions that appear in your accounting records but not on the bank statement.
• Record these outstanding transactions in a reconciliation worksheet.

Reconcile the balance:

• Adjust the ending balance on your bank statement for any outstanding deposits and checks that have not cleared.
• These adjustments should result in a reconciled bank balance that matches the ending balance on your accounting records.

Check for discrepancies:

• Compare the reconciled bank balance with the ending balance on your bank statement. They should now match.
• If there is still a discrepancy, review the transactions carefully to identify any errors or missing entries in your records.

Make necessary adjustments:

• If you find errors or discrepancies in your records, make the necessary adjustments to your accounting records to match the reconciled bank balance.
• Keep a record of these adjustments for future reference.

Document the reconciliation:

• Keep a copy of the bank reconciliation statement for your records.
• Add any notes or explanations for any discrepancies or adjustments made during the reconciliation process.

Performing regular bank reconciliations is essential for ensuring the accuracy of your financial (Also see Mastering Adjusting Entries for Accurate Financial Reporting) records and detecting any fraudulent activity or errors in your accounts. It also helps in maintaining control over your finances and budgeting effectively.