Hailey Johnson
Bank reconciliation is an essential tool for every accounting system. It ensures that your bank balance matches your book balance, helping you identify any differences and improve the accuracy of your books. It also improves your internal controls by locking down cleared transactions so they cannot be edited without reopening a past period. This process should be done regularly, with larger businesses performing reconciliations daily or weekly, while smaller businesses can do it monthly. Bank reconciliation can be done manually or with the help of online accounting software. This paragraph will discuss the steps involved in performing a bank reconciliation.
| Characteristics | Values |
|---|---|
| Purpose | To ensure that your bank balance matches your book balance and help identify the reasons for any differences |
| Frequency | Monthly for most organisations, but it can vary depending on needs and the number of transactions |
| Process | Select the register account, statement ending date, and enter the statement ending balance; check and match transactions on both statements, making adjustments if necessary; check the closing balance on both statements |
| Tools | Paper bank statement, online banking services, accounting software |
| Benefits | Improved accuracy of books, better internal controls, identification of potential errors or fraud, better financial management |
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What You'll Learn
Identify the register account and select 'Reconcile'
Bank reconciliation is a critical tool for every accounting system, as it ensures that your bank balance matches your book balance and helps you identify any discrepancies. This process should be performed regularly, with larger businesses reconciling their accounts daily or weekly, while smaller businesses can opt for a monthly reconciliation.
To begin the reconciliation process, you must first identify the register account you will be reconciling and select "Reconcile". This will initiate the reconciliation process, and the opening balance will be automatically set to 0.00 for your first bank reconciliation. For subsequent reconciliations, the opening balance will be automatically calculated based on previous reconciliations.
When selecting the register account, consider the volume of transactions and the complexity of your accounts. It is generally recommended to reconcile accounts with a high volume of transactions more frequently to maintain accurate records and catch any potential errors.
Additionally, you can choose to reconcile your accounts manually or utilise online accounting software, such as Sage 200 or Aplos, which offer tools to simplify the reconciliation process. These platforms allow you to download bank transactions directly, match them with your software transactions, and provide a user-friendly interface for reconciliation.
Remember that the reconciliation process is essential for maintaining accurate financial records and improving internal controls. By regularly reconciling your accounts, you can identify errors, improve accuracy, and ensure the security of your financial information.
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Print a bank statement for the period
Printing a bank statement for a specific period is a straightforward process. Firstly, you should ensure that you have access to all the necessary statements for the period in question, especially if you are reconciling multiple bank accounts. This can be done by gathering physical or digital copies of the statements, depending on how your bank provides them.
If you are using QuickBooks Online (QBO), you can print a prior month's bank reconciliation report by following these steps:
- On the left navigation panel, select 'Reports'.
- In the 'Find report by name' search bar, type 'Reconciliation Report'.
- Select 'Reconciliation Reports'.
- Choose the account and the report period for the reconciliation you want to print.
- Under the 'ACTION' column, click the 'View report' link.
- Choose the statement ending date.
- Once the reconciliation report is displayed, click the 'Print' icon in the upper-right corner of the report.
If you have reconciled for more than 120 times, you may need to change the system date of your computer to your desired period to access the previous reconciliation. Alternatively, you can create a backup file, open it, and undo all the bank reconciliations back to the month for which you need the report.
By following these steps, you will be able to print a bank statement for the desired period and utilise it for your bank reconciliation process.
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Check for missing transactions
When performing a bank reconciliation, it is crucial to check for missing transactions to ensure the accuracy of your financial records. Here are some detailed steps and strategies to help you identify and address any missing transactions:
Begin by reviewing your bank statements and internal financial records for the relevant period. Compare the transactions on both sides, looking for any discrepancies or missing entries. This process involves carefully checking the dates, amounts, and descriptions of each transaction to ensure they align between your records and the bank's records.
Pay close attention to the timing of transactions. Sometimes, transactions may be posted on different dates by the bank and your organization due to processing times or errors. Look for transactions that might be recorded on one side but not the other and investigate the reasons for the discrepancy.
Cross-reference your list of outstanding checks with the bank's records. Ensure that any checks you have issued but have not yet been cashed are accounted for and correctly reflected in your reconciliation. Also, check for any deposits or payments that may have been received by the bank but not yet recorded in your books.
Review your internal records for any transactions that may have been missed or incorrectly entered. Human error or technical issues could result in transactions being omitted or posted to the wrong accounts. Compare your data with source documents such as invoices, receipts, and expense reports to identify any discrepancies.
If you identify missing transactions, take the necessary steps to correct your records. Depending on the nature of the discrepancy, you may need to adjust your cash balance, reverse or re-enter transactions, or create journal entries to reflect the accurate financial position. It is important to document these adjustments and communicate them to the relevant stakeholders within your organization.
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Match transactions in your accounting software
Bank reconciliation is a critical process for any business to ensure that its bank balance matches its book balance. It is a process that should be carried out regularly, with the frequency depending on the number of transactions that go through the business's accounts. For instance, larger businesses with many transactions may perform daily or weekly reconciliations, while smaller businesses may do it once a month.
Reconciliation can be done manually or by using accounting software. If you are using accounting software, you can download bank transactions and match them to the transactions in your software. This can be done automatically or manually, by matching transactions by reference, date, or both. As you go through the transactions, you will mark the payments and deposits as cleared, with the goal of arriving at your statement ending balance.
If you use Sage 200, you can use the Sage bank feeds service to download bank account transactions and compare them to your Sage 200 transactions. This saves time, simplifies the reconciliation process, and ensures your accounts are accurate and up to date.
If you use Aplos, you can access your Bank Reconciliation screen by going to Fund Accounting > Transactions > Bank Reconciliation. You can then check off transactions that appear on both your bank statement and in Aplos. As you check things off, you will notice the difference between the two balances either increasing or decreasing. If there are any entries that don’t match, you must make the necessary adjustments. For example, if you see an income payment listed on your bank account, add this to your accounting record to match.
Once you have completed a bank reconciliation, you can delete the transactions. This is a good housekeeping practice to ensure the volume of transactions on a bank account doesn't become too large.
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Confirm and lock the reconciliation
Confirming and locking the reconciliation is the final step in the bank reconciliation process. This is where you ensure that the reconciliation is accurate and complete before locking the cleared transactions. Here are the detailed steps to confirm and lock the reconciliation:
Review the Reconciled Items
Before confirming the reconciliation, review all the reconciled items to ensure their accuracy. This includes verifying that all transactions on both your bank statement and accounting software/records have been checked and matched. Cross-reference the transactions on both platforms to identify any discrepancies. Go through each transaction, marking them as cleared, and ensuring that the payment and deposit amounts match.
Verify the Closing Balance
Check the closing balance on both your bank statement and accounting software/records. These closing balances should be equal. If they are not equal, it indicates that there are still discrepancies in the transactions that need to be addressed. You may need to repeat the previous steps to identify and rectify these discrepancies.
Lock the Reconciliation
Once you are satisfied that all transactions have been accurately reconciled and the closing balances match, you can lock the reconciliation. This step will vary depending on the software you are using. For example, in Sage 200, you can delete the reconciled transactions as a housekeeping measure. In other software, there may be an option to confirm and lock the transactions for that specific period.
Save or Complete the Reconciliation
If, for any reason, you are unable to complete the reconciliation, you can save your progress. This option allows you to resume the reconciliation process at a later time. Once you are confident that the reconciliation is accurate and complete, you can select the option to confirm and complete the reconciliation. This will lock the cleared transactions, preventing any edits without reopening a past period.
It is important to note that the specific steps and processes for confirming and locking a bank reconciliation may vary depending on the software or platform you are using. The above steps provide a general guide, and it is recommended to refer to the specific instructions provided by your chosen software or accounting platform.
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