Preparing bank reconciliations is an important aspect of maintaining accurate financial records. You can prepare a simple or detailed form, depending on your needs.
Before starting, you should gather all of your bank statements for the current and prior months. You may also want to use a spreadsheet or other template for this purpose. You will need to make sure that the closing balance of the accounts is accurate and that all of the entries in the ledger are correct.
Ideally, the bank balance and the general ledger (G/L) balance should match. Differences in the balances could be as a result of unpresented checks, bank overdraft, penalties, or fees. A bank reconciliation is the best way to identify these differences.
The process is simple. It starts by comparing the total bank balance per the bank statement with the G/L balance. Incorrect information on either side can lead to an unreconciled balance, which can lead to inaccurate financial records.
Bank reconciliations can be helpful in identifying problems with your accounting system. For example, a missing check in the bank’s database can result in an incorrect bank balance. In this case, you will need to credit the correct bank account. You can also use the bank statement to identify any irregularities. For example, a bank may reject a check for various reasons, such as wrong signor signature.
A bank reconciliation statement will also help you locate errors and other irregularities. An error may occur if the bank added or deducted interest payments or service fees without notifying you. A bank reconciliation statement will enable you to control these changes and prevent fraud.
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