How to Do a Bank Reconciliation: Step-By-Step 2024

If not, you’re most likely looking at an error in your books (or a bank error, which is less likely but possible). If you suspect an error in your books, see some common bank reconciliation errors below. You will be increasing your cash account by $5 to account for the interest income, while you’ll bank reconciliation be reducing your cash account by $30 to account for the bank service fee. Your bank reconciliation form can be as simple or as detailed as you like. For example, your bank statement shows that your ending balance is $11,450, while your G/L balance according to your trial balance is $10,850.

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Adjust the Bank Statements

Customer check of $1,250 deposited by Company A has been returned and charged back as NSF (not sufficient funds). Subtract any drawn checks that have been written to make a payment but not yet cleared by the bank. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.

Bank reconciliation statements are effective tools for detecting fraud, theft, and loss. For example, if a check is altered, the payment made for that check will be larger than you anticipate. If you notice this while reconciling your bank accounts, you can take measures to halt the fraud and recover your money.

Deductions from a bank statement:

When you’re completing a bank reconciliation, the biggest difference between the bank balance and the G/L balance is outstanding checks. Most business owners receive a bank statement, either online or in the mail, at the end of the month. Most business accounts are set up to run monthly, though some older accounts may have a mid-month end date. Adjust the cash balances in the business account by adding interest or deducting monthly charges and overdraft fees. Bank errors are mistakes made by the bank while creating the bank statement.

• With HighRadius, you can improve your bank reconciliation process, optimize your cash flow management, and reduce the risk of errors and discrepancies.
• Once the underlying cause of the difference between the cash book balance and the passbook balance is determined, you can make the necessary corrections in your books of accounts to ensure accuracy.
• Sometimes your current bank account balance is not a true representation of cash available to you, especially if you have transactions that have not settled yet.
• However, you typically only have a limited period, such as 30 days from the statement date, to catch and request correction of errors.