Bank Reconciliation: Purpose, Example, Process

Bank account reconciliation is used to ensure that your general ledger balance and your bank balance match. This is done by noting discrepancies between the two accounts, finding the missing information, and making any additions or corrections in your general ledger. To see all of your adjustments on the list, you can review a Previous Reconciliation report for the reconciliation you adjusted. This will show you cleared transactions and any changes made after the transaction that may not show in your discrepancies. Make sure you enter all transactions for the bank statement period you plan to reconcile.

This way, you can ensure your business is in solid standing a look at the renovation of the estate of things and never be caught off-guard. Since you’ve already adjusted the balances to account for common discrepancies, the numbers should be the same. These checks are the ones that have been issued by your business, but the recipient has not presented them to the bank for the collection of payment. However, sometimes there are differences between the two balances and so you’ll need to identify the underlying reasons for such differences.

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Once an expense on your statement can be matched with a recorded expense, you can click on the circle next to the amount to match the two amounts. Easily run financial statements that show exactly where your business stands. Access your cash flow statement, balance sheet, and profit and loss statement in just a few clicks. This is a simple data entry error that occurs when two digits are accidentally reversed (transposed) when posting a transaction.

However, adjusting entries should be made only as a last resort for small amounts. There are several reports – such as the The Reconciliation Discrepancy Report, the Missing Checks Report, and the Transaction Detail Report – that can help you identify discrepancies quickly. The journal entry goes into a special expense account called Reconciliation Discrepancies. When you’re done reviewing your statement, you’ll know everything made it into QuickBooks. Before you start with reconciliation, make sure to back up your company file. The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.

How Often Should You Reconcile Your Bank Account?

These charges won’t be recorded by your business until your bank provides you with the bank statement at the end of every month. There are bank-only transactions that your company’s accounting records most likely don’t account for. In this instance, your bank has recorded the receipts in your business account at the bank, while you haven’t recorded this transaction in your cash book. As a result, the balance shown in the bank passbook would be more than the balance shown in your company’s cash book.

Start reconciling your accounts

1. If you want to reconcile your checking account, you would just choose checking from the drop-down menu.
2. All of your bank and credit card transactions automatically sync to QuickBooks to help you seamlessly track your income & expenses.
3. You enter the balance of your real-life bank account for whatever day you choose.
4. However, there might be a situation where the receiving entity may not present the checks issued by your business to the bank for immediate payment.
5. If there are transactions that haven’t cleared your bank yet and aren’t on your statement, wait to enter them.

It’s easy to assume that large financial institutions don’t make mistakes, but they do. A few years back, I had checks belonging to someone else clearing in my account for three months in a row. If I hadn’t looked at the checks that were clearing to match them with my transactions, chances are I never would have spotted them. If you pay your vendors or your employees with a check, you’ll need to keep track of those checks. Most importantly, ‎receipts by wave on the app store you’ll need to know how much in outstanding checks you have at the end of the month.

Timing Differences in Recording of Transactions

Using cloud accounting software, like Quickbooks, makes preparing a reconciliation statement easy. Because your bank account gets integrated with your online accounting software, all your bank transactions will get updated automatically and each item will be matched with your books break even analysis of accounts. While reconciling your books of accounts with the bank statements at the end of the accounting period, you might observe certain differences between bank statements and ledger accounts. If this occurs, you simply need to make a note indicating the reasons for the discrepancy between your bank statement and cash book. The information on your bank statement is the bank’s record of all transactions impacting the company’s bank account during the past month. Compare the ending balance of your accounting records to your bank statement to see if both cash balances match.

Once you get your bank statements, compare the list of transactions with what you entered into QuickBooks. Before you reconcile your bank account, you’ll need to ensure that you’ve recorded all transactions from your business until the date of your bank statement. If you have access to online banking, you can download the bank statements when conducting a bank reconciliation at regular intervals rather than manually entering the information. QuickBooks Online makes it much easier to reconcile your bank accounts, and it can reconcile credit card accounts as well. Connect QuickBooks to your bank, credit cards, PayPal, Square, and more1 and we’ll import your transactions for you. When you receive your bank statement or account statement at the end of the month, you’ll only spend a minute or two reconciling your accounts.