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Bank Reconce

The document outlines the step-by-step process for doing bank reconciliation including comparing deposits and adjusting bank statements and cash accounts to ensure accuracy and identify discrepancies. Bank reconciliation is important for maintaining financial health and making business decisions.

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22 views2 pages

Bank Reconce

The document outlines the step-by-step process for doing bank reconciliation including comparing deposits and adjusting bank statements and cash accounts to ensure accuracy and identify discrepancies. Bank reconciliation is important for maintaining financial health and making business decisions.

Uploaded by

tecfinfo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as TXT, PDF, TXT or read online on Scribd
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# **How to Do Bank Reconciliation: A Step-by-Step Guide**

Bank reconciliation is a crucial process for ensuring the accuracy of your


financial records. By comparing your business's cash balances with the bank
statement, you can identify discrepancies, resolve errors, and maintain financial
transparency. Let's walk through the steps:

1. **Compare the Deposits**:


- Obtain your bank statement (usually received at the end of each month).
- Match the deposits recorded in your business records with those in the bank
statement.
- Compare the amounts on both sides (debit side of the cashbook vs. credit side
of the bank statement).
- Mark items that appear in both records.

2. **Adjust the Bank Statements**:


- Correct the balance on the bank statement:
- **Deposits in Transit**: These are amounts received by your business but not
yet recorded by the bank. Add them to the bank statement.
- **Outstanding Checks**: These checks have been written and recorded in your
cash account but haven't cleared the bank. Deduct them from the bank balance.
- **Bank Errors**: Identify mistakes made by the bank (e.g., incorrect amounts
or omissions). Compare your cash account's general ledger to the bank statement to
spot errors.

3. **Adjust the Cash Account**:


- Now adjust the cash balance in your business account:
- **Interest or Earnings**: Add any interest earned.
- **Monthly Charges and Overdraft Fees**: Deduct service charges or fees from
the bank's processing of your checking account activity.
- **NSF (Non-Sufficient Funds) Checks**: Account for any bounced checks.
- **Accounting Errors**: Rectify any mistakes in your accounting.

4. **Compare Both Adjusted Balances**:


- After making the necessary adjustments, compare the corrected bank balance
with your adjusted business cash balance.
- Ideally, they should match. If not, investigate further to identify any
remaining discrepancies.

## **Purpose of Bank Reconciliation**:


- **Liquidity**: Ensures you have enough cash for day-to-day operations.
- **Efficiency**: Improves cash flow and resource utilization.
- **Risk Mitigation**: Reduces financial risks and safeguards against insolvency.

Remember, accurate bank reconciliation is essential for maintaining financial


health and making informed business decisions. 📊💰

---
*For more insights into financial management, consider exploring the [Ultimate
Guide to Working Capital
Management](https://www.dripcapital.com/en-us/resources/finance-guides/working-
capital-management).*¹².

Source: Conversation with Bing, 4/8/2024


(1) How to Do a Bank Reconciliation: Step-By-Step Process - FreshBooks.
https://www.freshbooks.com/hub/accounting/do-bank-reconciliation.
(2) How to do a step-by-step bank reconciliation | QuickBooks.
https://quickbooks.intuit.com/r/accounting/bank-reconciliation/.
(3) How To Do A Bank Reconciliation: Step By Step - Forbes.
https://www.forbes.com/advisor/banking/bank-reconciliation-how-to/.
(4) en.wikipedia.org. https://en.wikipedia.org/wiki/Bank_reconciliation.

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