Bank reconciliation statements reconcile the bank's records with your company's general ledger. This reconciliation should be completed monthly to check for errors or unauthorised withdrawals. Bank reconciliation statements are an important part of the financial auditing process that every business must do.
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Bank Reconciliation Process
To balance a bank reconciliation statement, take the balance on the bank statement and subtract any outstanding checks that have been written but have not cleared the bank. This should match the balance in your general ledger, once bank fees have been entered.
Checks and Balances
A bank reconciliation statement offers checks and balances for your accounting and the bank's accounting. If an employee has been writing checks or stealing money from an account, the bank reconciliation statement will catch it. This is why an important accounting rule is the person who handles payables and writes checks never reconciles the account. Bank reconciliation statements should always be reconciled by another person to have a separation of job duties.
Bank reconciliation statements will show if there are any outstanding checks or wires that have not cleared the bank or deposits that are not recorded. This can indicate problems with the delivery of these payments, or the deposit of items. If an item is outstanding for more than a month, you should contact the payee to check the mailing address or bank account numbers. You may have to void and reissue a check or wire, if they are not received after several months. Missing deposits will require a deposit receipt if it is a bank error or an audit if it is an employee error.
Occasionally, the bank will make errors. Wires might be duplicated or checks from someone else's account might be hitting your account. Bank reconciliations statements give the detailed transaction history to help you find those errors to have the bank correct them.
Bank reconciliation statements will list all bank fees that were charged to your account. You will need to enter those bank fees into your general ledger to reconcile the statement. It is always a good idea to check the fees to make sure your bank account is not being overcharged in error.