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A bank reconciliation statement should be prepared every month end for every bank account held and then reviewed and signed by another responsible person such as the manager or Treasurer. The signed statements should then be carefully filed in date order for each account. It is therefore very important for managers to carefully check bank reconciliation statements every month.

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Accountants reconcile bank statements with the accounting records and catch these culprits wearing the masks of bank charges, uncleared and cleared cheques, and so on. A bank reconciliation statement is generally prepared to compare your records i.e., the cash transactions with the bank, and identify if there are any differences between the two. With that being said, it is extremely common to see differences in the balance. Tracking down these differences and adjusting them in your records is extremely important.

– A bank reconciliation statement is a document summarising the business and banking activities involved in reconciling an organisation’s bank account. This summary details the withdrawals, deposits, and other relevant activities that may impact a bank account within a specific timeline. Section A is where you calculate what your bank account balance from your own financial database.

Who are the parties involved in a bank reconciliation statement?

Otherwise, it may find that cash balances are much lower than expected, resulting in bounced checks or overdraft fees. A bank reconciliation will also detect some types of fraud after the fact; this information can be used to design better controls over the receipt and payment of cash. Ideally speaking, companies ought to reconcile their bank statements every month or even as soon as these bank statements are produced in order to maximise their ability to spot errors early. On that note, firms could consider using accounting software like Kolleno to automate their manual accounting procedures. In specific, Kolleno is a smart credit control platform that provides a 360° view of a company’s customer base, thereby helping the business to streamline its reconciliation process.

The bank may send you a bank statement at the end of each month, every week, or even at the end of each day in case of businesses having a huge number of transactions. Once the adjusted balance of the cash book is worked out, then the bank reconciliation statement can be prepared. In this way, the number of items that cause the difference between the passbook and the cash book balance gets reduced.

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At the end of this process, the adjusted bank balance should equal the company’s ending adjusted cash balance. You must post the journal entries of all the adjustments made to the balance as per the cash book. Once you post the journal entries into your company ledger accounts, make sure that the cash account balance is equal to the adjusted balance per cash book shown in the bank reconciliation statement. A bank reconciliation statement is prepared by a depositor (account holder) to overcome differences in the balances of the cash book and bank statement.

To reconcile a bank statement, the account balance as reported by the bank is compared to the general ledger of a business. This helps to pick up any missing items and incorrect entries in the records and to ensure that our accounts are accurate and complete. Rutherford Inc. has  a difference in the balance as on 31st March 2021 between the bank statement and cash book. In this blog, we will introduce you to some real-life bank reconciliation examples as well as the major roadblocks faced by organizations while reconciling their bank statements. Therefore, when your balance as per the cash book does not match with your balance as per the passbook, there are certain adjustments that you have to make in order to balance the two accounts.