how to do a bank reconciliation
to successfully complete your bank reconciliation you ll need your bank statements for the current and previous months as well as your company ledger an online template can help guide you but a simple spreadsheet is just as effective here are the basic steps to follow 3if you find a large dollar amount discrepancy between bank and company ledgers your current bank statement may include a significant deposit or withdrawal from the previous month adjusting discrepancies between books and bankthe cash account balance in an entity s financial records may also require adjusting in some specific circumstances if you find discrepancies with the bank statement in these cases journal entries record any adjustment to the book s balance after fee and interest adjustments are made the book balance should equal the ending balance of the bank account a bank may charge an account maintenance fee typically withdrawn and processed automatically from the bank account when preparing a bank reconciliation statement a journal entry is prepared to account for fees deducted interest earned also requires an adjustment interest is automatically deposited into a bank account after a certain period of time so the company s accountant prepares an entry increasing the cash currently shown in the financial records after adjustments are made the book balance should equal the ending balance of the bank account bank reconciliation statements compare transactions from financial records with those on a bank statement where there are discrepancies companies can identify and correct the source of errors for example say abc holding co recorded an ending balance of 500 000 on its records however its bank statement shows an ending balance of 520 000 after careful investigation abc holding found that a vendor s check for 20 000 hadn t been presented to the bank it also missed two 25 fees for service charges and non sufficient funds nsf checks during the month the reconciliation statement allows the accountant to catch these errors each month the company can now take steps to rectify the mistakes and balance its statements here s an example in the table below 