A bank reconciliation is the process of comparing two sets of records to determine if the figures are accurate and they agree. A bank reconciliation matches accounting records to the balances that appear on a bank statement and should any differences be identified the accounting records are subsequently modified. The goal of the bank reconciliation is to determine if the discrepancy is due to an error as opposed to timing.
Bank reconciliations are completed at regular intervals to ensure that the accounting records are properly maintained with most businesses undertaking the process of reconciling the bank account on a monthly basis end upon receipt of the bank statement which contains a list of the transactions for a nominated period as well as identifying both the opening and closing balance for the relevant accounting period.
While the bank reconciliation process is important the process is relatively simple.
In the first instance collect the documents required to prepare the reconciliation, the most common being the bank statement which is compared to the entries input into the accounting records. In a computerized environment, open the accounting software, record the closing balance of the bank statement in the software, update cleared deposits and payments, enter new expenses or charges that appear on the bank statement and review the reconciliation.
Should there be a difference, investigate any undocumented reconciliation item such as un-presented cheques or a deposit that may have reversed. Continue investigation until all reconciliation items have been identified and addressed.
Once the accounting software contains the correct entries, reconciliation is complete for that accounting period.
Leigh Barker, MWC Group / Portfolio Finance 