What do we mean by a bank reconciliation?
What is the purpose of bank reconciliation?
What documents are needed to perform a bank reconciliation?
What are the steps to follow to carry out a Bank Reconciliation?
Bank reconciliation: definition
Bank reconciliation is an accounting technique whose objective is to verify the transactions entered in the bank account (5141 of the PCGM), with those found in the bank statements. It is a question of verifying the concordance of these two balances, through a score of the documents.
The benefits of bank reconciliation:
Bank reconciliation is essential in order to carry out a check on the consistency of accounts to ensure the correct accounting of accounting entries, thus it allows better management of cash through the detection of anomalies during accounting, which allows you to have a more reliable overview of your cash flow to better manage it. Among the discrepancies often noted during the preparation of the bank reconciliation, we find:
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Banking transactions not recorded in the accounts;
An accounting record with inaccurate amounts;
Agios and bank charges not recorded in the accounts.
What are the steps to follow to carry out a bank reconciliation:
The main steps to carry out a bank reconciliation are as follows:
Collect the necessary documents to perform a bank reconciliation: For this step you will need bank statements from the accounts for the period concerned, the general ledger and the bank reconciliation statement from the previous period.
Prepare a bank reconciliation statement: A bank reconciliation statement is made up of a table:
A first line that mentions the amount of the bank statement;
Two columns, the first of which includes the amount of debit balances and the second includes the credit balances of the bank recorded in the accounts;
In another table, of the same format, you need to put 2 columns, which include the debit and credit balance of the bank statement.
Then you must add a line that mentions the theoretical accounting balance;
Add another line that mentions the bank statement balance;
Finally add a line that calculates the difference between the two previous balances.
At the end of the reconciliation and the checks put in place, you should not have differences at the level of the last line.
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Checking the concordance of accounts: In this step you must check line by line that the bank statement is identical to the accounting, and identify any discrepancies you find.
Regularization of entries: After identifying the existing discrepancies, you must regularize the entries.
The tools needed to conduct a bank reconciliation:
To carry out a bank reconciliation, it can be done by using the following tools:
A bank reconciliation using Excel: In this case you will do the reconciliation manually in Excel in the form of a table, as indicated above.
A bank reconciliation by accounting software: There are software programs that manage all of a company's accounts, and which make it possible to establish a bank reconciliation in an assisted manner.
Example of bank reconciliation template:
| The balance shown in the bank statement | X |
| Movements appearing on the bank statement | |||
| Date | Designation | Debit | Credit |
| Total | A | B |
| Movements appearing in the accounts | |||
| Date | Designation | Debit | Credit |
| Total | C | D |
| The theoretical balance in accounting F= | X+AB-C+D |
| The actual balance in accounting | G |
| Deviation H= | GF |