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Bank Reconciliation Statement

Bank Reconciliation Statement

What Is a Bank Reconciliation Statement?

A bank reconciliation statement is a summary of banking and business activity that reconciles an element's bank account with its financial records. The statement frames the deposits, withdrawals, and different activities influencing a bank account for a specific period. A bank reconciliation statement is a helpful financial internal control tool used to impede fraud.

Figuring out the Bank Reconciliation Statement

Bank reconciliation statements guarantee payments have been handled and cash collections have been deposited into the bank. The reconciliation statement recognizes differences between the bank balance and book balance, to deal with essential adjustments or corrections. An accountant normally processes reconciliation statements one time each month.


Software that mechanizes bank reconciliation can assist with lessening errors associated with manual processing.

Requirements for a Bank Reconciliation Statement

Completing a bank reconciliation statement requires utilizing both the current and the previous month's statements, including the closing balance of the account. The accountant normally prepares the bank reconciliation statement utilizing all transactions through the previous day, as transactions might in any case happen on the genuine statement date.

All deposits and withdrawals posted to an account must be utilized to prepare a reconciliation statement.

The accountant changes the ending balance of the bank statement to reflect outstanding checks or withdrawals. These are transactions in which payment is in transit however the cash has not yet been accepted by the beneficiary.

A model is a check sent on Oct. 30. While setting up the Oct. 31 bank reconciliation statement, the check sent the previous day is probably not going to have been cashed, so the accountant deducts the amount from the bank balance. There may likewise be collected payments that poor person yet been handled by the bank, which requires a positive adjustment.

Adjusting Balance per Books

The balance of the cash account in an element's financial records might require adjusting too. For example, a bank might charge a fee for having the account open. The bank ordinarily pulls out and processes the fees naturally from the bank account. Thusly, while setting up a bank reconciliation statement, any fees considered must be accounted for by setting up a journal entry.

Another thing that requires an adjustment is interest earned. Interest is consequently deposited into a bank account after a certain period of time. Hence, the accountant might have to prepare an entry that builds the cash currently displayed in the financial records. All things considered, adjustments are made to the books, the balance ought to approach the ending balance of the bank account. On the off chance that the figures are equivalent, an effective bank reconciliation statement has been prepared.

Benefits of a Bank Reconciliation Statement

Bank reconciliation statements are effective tools for identifying fraud. For instance, in the event that a check is altered, bringing about a payment bigger than anticipated, measures can be taken to interfere with the corrupt activity.

Bank reconciliation statements additionally assist with recognizing errors that could adversely financial reporting. Financial statements show the wellbeing of a company for a specific period or point in time and are frequently used to compute profitability. Accurate financial statements permit investors to pursue informed choices and give companies clear photos of their cash flows.

Reconciling bank statements assists with distinguishing errors that influence tax reporting. Without reconciling, companies might pay too a lot or too minimal in taxes.

Illustration of a Bank Reconciliation Statement

Bank reconciliation statements compare transactions from financial records to those on a bank statement. Where there are inconsistencies, companies are able to distinguish the source of errors and correct them.

For instance, ABC Holding Co. recorded an ending balance of $480,000 on its records. Nonetheless, its bank statement shows an ending balance of $520,000. After careful investigation, ABC Holding Co. found that a merchant's check for $20,000 had not been introduced to the bank, and a $20,000 deposit made by a client was unintentionally overlooked from the company's records. Along these lines, ABC Holding Co. adjusted it's records, taking note of the check as outstanding and adding the missing deposit.

The Bottom Line

Bank reconciliation statements are valuable checks and balance tools used to recognize errors, omissions, and fraud. When done oftentimes, they assist companies with upsetting fraud before serious damage happens and keep errors from compounding. It is likewise a simple and invaluable interaction to assist with overseeing cash flows.


  • All fees charged on an account by a bank must be accounted for on a reconciliation statement.
  • After all adjustments, the balance on a bank reconciliation statement ought to rise to the ending balance of the bank account.
  • A bank reconciliation statement sums up banking and business activity, reconciling an element's bank account with its financial records.
  • Bank reconciliation statements confirm that payments have been handled and cash collections have been deposited into a bank account.


What Are Common Problems With Bank Reconciliations?

Inconsistent reconciliations make it hard to address issues when they emerge as the required data may not be promptly available. Likewise, when transactions are not recorded speedily and when bank fees and charges apply, a mismatch can happen.

Why Is Bank Reconciliation Important?

Bank reconciliation assists with distinguishing errors that can influence tax and financial reporting. It additionally assists with distinguishing and further forestall fraud.

How Often Should You Do a Bank Reconciliation?

To rapidly distinguish and address errors, reconciling bank statements ought to be done month to month or as regularly as statements are produced.

Where Do NSF Checks Go on a Bank Reconciliation?

NSF checks are recorded as an adjusted book balance detail on the bank reconciliation statement, with the NSF amount deducted from its balance.

What Are the Steps in a Bank Reconciliation?

The most important phase in reconciling a bank statement is to compare financial record activities to bank statement activities. For any bank errors, unaccounted for deposits, and unpresented checks, make adjustments to the bank statement balance. Some personal or business accounts don't account for bank-related increases and charges, for example, interest and maintenance fees. Make adjustments to the cash account records for these differences. When corrections and adjustments are made, compare the balances to check whether they match. In the event that not, repeat the cycle until the accounts are reconciled.