How to do Bank Reconciliation

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{{company_name}}

{{company_address}}

Phone: {{phone}}

Email: {{email}}

Website: {{website}}

1. Purpose of Bank Reconciliation

The purpose of this procedure is to reconcile the cash balance as per the company's accounting records with the balance as per the bank statement.

This process helps in identifying and investigating any discrepancies, ensuring the accuracy of financial statements, and detecting potential errors or fraudulent activities.

2. Required Documents

To perform a bank reconciliation, the following documents are required:

a) Bank Statement: The latest statement received from the bank for the period being reconciled (e.g., {{statement_period}}).

b) Cash Book/Ledger: The company's internal record of all cash receipts and payments for the same period.

c) Previous Bank Reconciliation Statement: The completed reconciliation statement from the prior period (e.g., {{previous_period_reconciliation}}).

3. Steps for Bank Reconciliation

Follow these steps to complete the bank reconciliation:

a) Compare Deposits: Match all deposits recorded in the cash book with deposits listed on the bank statement. Circle or tick off matching items. Identify any deposits in transit (recorded in cash book but not yet by bank) or unrecorded deposits (on bank statement but not in cash book).

b) Compare Withdrawals/Payments: Match all withdrawals and payments recorded in the cash book with those listed on the bank statement. Circle or tick off matching items. Identify outstanding cheques (recorded in cash book but not yet cleared by bank) or unrecorded withdrawals (on bank statement but not in cash book).

c) Identify Bank Charges and Interest: Note any bank charges, interest earned, or other bank-initiated transactions appearing on the bank statement that are not yet recorded in the cash book. (e.g., {{bank_charges_amount}}, {{interest_amount}}).

d) Correct Errors: Investigate any discrepancies found. These could include errors in recording amounts in either the cash book or by the bank. (e.g., {{error_description}}).

4. Preparing the Reconciliation Statement

Use the following format to prepare the bank reconciliation statement:

BANK RECONCILIATION STATEMENT AS AT {{reconciliation_date}}

A. Balance as per Cash Book:

Opening Balance ({{cash_book_opening_balance}})

Add: Deposits not yet credited by bank (Deposits in Transit) ({{deposits_in_transit}})

Add: Interest Received ({{interest_received}})

Less: Bank Charges ({{bank_charges}})

Less: Direct Debits/Debit Orders (not in cash book) ({{direct_debits}})

Adjusted Cash Book Balance: {{adjusted_cash_book_balance}}

B. Balance as per Bank Statement:

Opening Balance ({{bank_statement_opening_balance}})

Add: Outstanding Cheques ({{outstanding_cheques}})

Add: Errors in Bank Statement (If applicable) ({{bank_statement_errors}})

Less: Deposits not yet recorded in cash book ({{unrecorded_deposits}})

Adjusted Bank Statement Balance: {{adjusted_bank_statement_balance}}

Note: The Adjusted Cash Book Balance (A) and Adjusted Bank Statement Balance (B) should be equal.

5. Journal Entries for Adjustments

Any items identified during the reconciliation that affect the cash book balance (e.g., bank charges, interest earned, direct debits) must be recorded in the company's accounting records through journal entries.

Example Journal Entry for Bank Charges:

Date: {{journal_entry_date}}

Debit: Bank Charges Expense ({{bank_charge_expense_account}})

Credit: Bank Account ({{bank_asset_account}})

Amount: {{bank_charge_amount}}

Narration: To record bank charges for {{month}}.

6. Review and Approval

Upon completion, the bank reconciliation statement should be reviewed by a senior finance personnel (e.g., {{reviewer_name}}) and approved (e.g., {{approver_name}}).

The statement and supporting documents should be filed for audit purposes.

Signature

_________________________

{{preparer_name}}

{{preparer_title}}

Date: {{preparation_date}}

_________________________

{{reviewer_name}}

{{reviewer_title}}

Date: {{review_date}}