The bank reconciliation is the comparison made between the accounting notes kept by a company regarding its bank accounts and the adjustments made by the bank itself on those accounts. It is a necessary process for businesses and professionals, but it can be overlong and tedious. In this article we show you an example of a bank reconciliation performed manually.
There are many applications and programs that can perform an automated bank reconciliation, such as Captio, which allows us to reconcile travel expenses very simply. But if you choose to continue going through this process manually, this post could be very useful.
The first document we need is the bank statement for the period we want to reconcile. It is usually done from month to month, but you can do it more often if necessary.As you know, before you start reconciling a period, such as one month, the accounting must be up-to-date in order to avoid having to reconcile several times. In this case, we are reviewing the company’s general ledger account. It is advisable to start the bank reconciliation by checking the final balance of the previous month or, if necessary, even earlier. This will be useful if there is a transaction which has been recorded on a date prior to the squaring of balances. Thus, if we find an error, it will not be necessary to re-check everything point by point, but simply to check by sections to find out in which month the discrepancy occurred.
Most companies have several bank accounts, so we have to check that we are reconciling information for the same bank and the same account.
The last document we will need is the bank reconciliation from the previous month to check the final balance and, in the event of finding any mismatch, to verify whether its origin is in the month to be reconciled or whether we have been carrying it forward from previous periods.
As a recommendation, it is important not to forget cash. Cash is also part of the liquid assets of the company, so if we do not consider it, errors could occur in the reconciliation. It is advisable to periodically perform a triple reconciliation with actual cash flow, a cash journal and the cash ledger account. This way we can minimise the possibility of finding any errors.