Bank Reconciliation Statements

Learn everything you need to know about bank reconciliation statements for a business - how to do them and how often.

Here you will see a sample and have access to a free, printable template. This information can also be used to balance your personal bank accounts.

What are Bank Reconciliation Statements?

Any business that is receiving and spending money will use banking and bank reconciliation procedures.

The bank will regularly send the business a bank statement which lists in date order the money that has gone in and out of the bank account.

In the meantime, the business’ bookkeeper will have entered these withdrawals and deposits into the business cashbook.

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Bank reconciliations verify that the funds going in and out the cashbook agree with
the funds going in and out the bank account.

Why Do Bank Reconciliation Statements
Need to Be Done

How to do Bank Reconciliation Statement

If the closing balance of the cashbook does not match the closing balance of the bank statement, the cashbook will need to be adjusted or amended.

The reconciliation helps the bookkeeper to find what is causing the difference and make the necessary adjustments.

Of course, there may be an error on the bank statement rather than the cashbook, however, in my experience banks very rarely make these errors. I’m not saying they don’t happen, but it is rare!

If you live in a country where you have to collect and pay sales tax, bank reconciliation statements will help you find any entries you may have doubled up on in the cashbook – which will help you avoid paying too much sales tax – or too little!

Your tax accountant will want to check the accuracy of your cash book by viewing your final bank statement and reconciliation statement for the end of the year.

An accurate cashbook plays a big part in ensuring the correct tax is paid to the government.

How Often Should Bank Reconciliation
Statements Be Done?

Bank Reconciliation Statements

Bank reconciliation statements are generally completed once a month.

However, if your business is very busy with a large number of transactions you could ask your bank for an extra statement mid-month, or even weekly.

That way you can easily stay on top of the reconciliations and avoid feeling rushed or stressed once a month.

If you have access to internet banking you do not have to wait for the bank to send you a statement. Simply print a transaction listing for the dates you require. Ensure there is an opening balance and a closing balance because these are required to complete an accurate reconciliation.

There are no "rules" about how often to do a bank reconciliation statements. You can do it daily if you wish. Then again, you could do it six monthly but only if you have very few business transactions so that you don’t overload yourself with too much work in one sitting!

Also important to note is that you should never reconcile a bank statement to today's date, because today is not yet over and your closing balance might change by the end of the day. The most up-to-date you can make a reconciliation is to yesterday's date (meaning up to the day before you prepare a reconciliation).

How To Do Bank Reconciliations

Options on where to do it:

  1. Enter a reconciliation summary underneath the relevant month in the cashbook, or

  2. Prepare a bank reconciliation form, or

  3. Invest in bookkeeping software that has reconciliation capabilities.

If you are keeping a manual cashbook you need to check off each cashbook entry against each bank statement entry.

You can put a small tick on the bank statement next to the entry and put a tick or an 'R' for reconciled in the cashbook next to the relevant entry. If there are extra entries in the cashbook that do not show up on the bank statement, or vice versa, you need to highlight or circle them so that you can adjust the cashbook once you find out what they are. They might be:-

Outstanding checks/withdrawals* - these are checks that your business has entered into the cashbook and sent to vendors but which did not show up at the bank by the closing date of your bank statement.

Outstanding deposits/receipts** - these are payments that you have received into the cashbook, but which were not deposited to your bank before the bank statement closing date.

Bank Fees and Interest - these are charges that you would normally only know about after receiving your bank statement. You will need to enter these into the cashbook.

Other Unidentified Entries - if there are any other entries missing from either document then you will need to investigate how they got there and make the necessary adjustments.

* Outstanding checks/withdrawals will be added to the reconciliation
** Outstanding deposits/receipts will be deducted from the reconciliation

If the bank account is in overdraft, then do it the other way around.

Reconciliation in the Cashbook

See the example of this reconciliation underneath the cashbook spreadsheet.

Bank Reconciliation Form
If you don’t want to enter the reconciliation into the cashbook, you can use a form instead (see example below). Click here to download a template.

Bookkeeping Software Reconciliation

Bookkeeping software that has reconciliation capabilities makes the whole process quick and easy.

All you need to do is click on the reconciliation section of the software, run your eyes down the bank statement, check off each entry in the software’s reconciliation section, add in the extra entries, press a button...

...and voila! you should have an automated bank reconciliation statement that you can print out and place into your filing system.

Below is a simple bank reconciliation example based
upon this cashbook spreadsheet


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Bank Reconciliation Statements

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