What is the procedure for performing a bank reconciliation?

General
1

what is the procedure for performing a bank reconciliation?

2

What is the procedure for performing a bank reconciliation?

Answer:
Performing a bank reconciliation is an important process that helps ensure the accuracy of a company’s financial records. Here’s a step-by-step procedure for performing a bank reconciliation:

  1. Gather the necessary documents: Collect bank statements, canceled checks, deposit slips, and any other relevant financial records.

  2. Compare the bank statement to the company’s records: Start by comparing the ending balance on the bank statement to the balance in the company’s books. Ensure that all transactions, such as deposits, withdrawals, and fees, are accurately recorded in both sets of records.

  3. Check for outstanding checks and deposits in transit: Compare the checks issued by the company that have not yet cleared the bank (outstanding checks) to the checks recorded in the company’s books. Similarly, compare any deposits made by the company that have not yet been credited to the bank account (deposits in transit).

  4. Adjust for bank errors: If there are any errors or discrepancies found in the bank statement, such as incorrect fees or missing transactions, contact the bank to resolve the issues. Make the necessary adjustments in the company’s records to reflect the corrected amounts.

  5. Adjust for company errors: If there are any errors or discrepancies found in the company’s records, such as incorrect entries or missing transactions, investigate the cause and make the necessary adjustments in the company’s books.

  6. Reconcile the ending balances: Once all the adjustments have been made, compare the adjusted balance per books to the adjusted balance per the bank statement. They should now match.

  7. Document the reconciliation: It is essential to keep a record of the bank reconciliation process for future reference and audit purposes. This documentation can include copies of bank statements, reconciliation worksheets, and any supporting documents.

  8. Investigate any remaining differences: If there are still discrepancies after going through the reconciliation process, do a thorough review of the transactions and consult with the bank if needed to identify the cause of the differences.

By following this procedure, companies can ensure that their financial records are accurate and up to date, enabling better financial management and decision-making.