How to Prepare Bank Reconciliation Statement
Bank reconciliation is an essential process for businesses to ensure the accuracy of their financial records. It involves comparing the company’s cash book with the bank statement to identify any discrepancies. This article will guide you through the steps on how to prepare a bank reconciliation statement.
Step 1: Gather the Necessary Documents
Before starting the reconciliation process, you need to gather the following documents:
– Company’s cash book or general ledger
– Bank statement for the same period
– Any supporting documents such as cheques, bank statements, and cancelled cheques
Step 2: Compare the Opening Balances
Begin by comparing the opening balances of the cash book and the bank statement. Ensure that both balances match. If they don’t, investigate the reasons behind the discrepancy and make the necessary adjustments.
Step 3: Identify and Record Deposits
Go through the bank statement and identify any deposits made during the period. Compare these deposits with the cash book. If a deposit is missing in the cash book, record it as an addition to the cash book balance.
Step 4: Identify and Record Withdrawals
Similarly, go through the bank statement and identify any withdrawals made during the period. Compare these withdrawals with the cash book. If a withdrawal is missing in the cash book, record it as a deduction from the cash book balance.
Step 5: Adjust for Outstanding Cheques
Outstanding cheques are cheques that have been issued but not yet cleared by the bank. Identify any outstanding cheques in the bank statement and record them as deductions from the cash book balance.
Step 6: Adjust for Deposits in Transit
Deposits in transit are deposits made by the company but not yet recorded by the bank. Identify any deposits in transit in the cash book and record them as additions to the cash book balance.
Step 7: Adjust for Bank Charges and Interest
Check the bank statement for any bank charges or interest earned. Record these amounts as deductions or additions to the cash book balance, respectively.
Step 8: Finalize the Reconciliation
After making all the necessary adjustments, compare the adjusted cash book balance with the adjusted bank statement balance. If both balances match, the reconciliation is complete. If they still don’t match, review the entire process and check for any errors or omissions.
Step 9: Document the Reconciliation
Finally, document the reconciliation process by preparing a bank reconciliation statement. This statement should include the opening balances, adjustments made, and the final adjusted balances. Keep this statement for future reference and auditing purposes.
By following these steps, you can effectively prepare a bank reconciliation statement and ensure the accuracy of your financial records. Remember, regular bank reconciliation is crucial for maintaining the integrity of your company’s financial statements.
