How to Make a Bank Reconciliation Statement

Most of the time, the Bank Reconciliation Statement is in the form of a summary table of the anomalies identified during the bank reconciliation.  The latter consists of pointing out the bank’s accounts, visible on the bank account statements of the company, and compares it with the company’s checking account.

While it is not mandatory to draw up a bank reconciliation statement, this accounting tool makes it possible to ascertain the actual cash flow situation. It also contributes to the control of the quality of the accounting entry.

However, making bank reconciliation is often a tedious and time-consuming operation. New tools facilitate this operation. They save time and improve the value-added of administrative staff, who are often more useful when they are re-launching clients than when they are doing bookkeeping.

What is Banking Reconciliation?

Reconciling the bank account with the bank statements allows the accountants to identify the discrepancies between the dates of cash receipts and disbursements entered and the dates are actually taken into account by the bank. This also makes it possible to display accounting entry anomalies that must be regularized:

Double Counting a Check

Making regular bank reconciliation is an essential step that validates the “cash flow” part of the accounting follow-up.  An error in the cash flow can lead to more or less significant consequences for other works or documents drawn from the cash accounting follow-up.

The accounting entry of the dates of recording receipts and disbursements

When the company settles a claim by check or by transfer, the date of posting of the disbursement must correspond to the date of issue of the check or of realization of the transfer, even if the account will be debited later. When the company receives a payment by check, the date of posting of the receipt must correspond to the date on which the check was delivered to the bank. In the case of a transfer, the posting date must correspond to the date of receipt of the credit notice, even if the account is credited later.

Why are there differences between the Bank Statement and Cash Book?

Companies must use a bank account to operate. The accounts of the company and the bank are reciprocal and of opposite meaning. Bank charges, for example, represent a burden for the company but a product for the bank. However, the company’s accounting rarely agrees with the bank statements of its bank, especially because the registration dates of accounting transactions differ.

For example, if the bank records bank charges or records a customer’s transfer on a date, they will only be visible to the company when it reads its bank statement with days off, and even if the internet reduces the consultation time of the statement, a gap remains. The bank reconciliation makes it possible to verify that no error has crept into the accounting entries relating to the bank account over a given period.

How to make a Banking Reconciliation?

Performing a bank reconciliation report requires comparing the bank account statements for the period in question, the past and current cash flows and the accounting entries made on the account.

It can be realized in 3 different ways:

  • By performing manual pointing,
  • Using the accounting software,
  • Using a bank reconciliation tool.

Manual Bank Reconciliation Statement

It is possible to make bank reconciliation on paper, or using a spreadsheet. Most often the manual score is done monthly; here is the methodology that we recommend.

  • Gather the elements needed to score financial flows
  • Gather the elements needed to score financial flows. The first step will be to gather the following elements:
  • The latest bank reconciliation statement,
  • Account statements for the relevant period,
  • The extract from the relevant account checking (or ledger),
  • The various proofs of the cash movements of the period (check stubs, check deposits, cash discounts, proof of transfers,).

The bank reconciliation consists of comparing the bank statements and the bank account of the accounts and noting the differences, whenever a deviation is pointed, it can be explained by an error and must then be corrected or by a peculiarity. When the difference is due to an accounting specificity, it must be reported in a bank reconciliation statement. This summary document will make it possible to follow all the differences and to ensure, in the end, that all the differences explain the difference between the balance of the last bank statement of the period and the balance of the account bank accounting.