Bank Account Reconciliation
Reconciliation of bank accounts
What is a bank recon?
Preparing bank account reconciliation refers to the process of either manually or with the use of automated software verifying that the transactions displayed on your bank account are entered into the bank account on your bookkeeping system. If a reconciliation is performed correctly the end balance of your physical bank account should agree with the balance in the bank account of your bookkeeping system. Mistakes like missed debtor or creditor payments can be detected easily by reconciling your bank statement.
The process to prepare your bank account for reconciliation
The process of reconciling your bank statement will vary from accounting software to accounting software. The basic principle behind reconciliations however remains the same. You should print your bank statement directly from your bank account regularly, depending on the number of transactions to be reconciled this can be done on a daily, weekly or monthly basis. After printing the statement transactions are entered into your accounting software one by one, in some systems you can import the raw data into your accounting program so that the transactions on your bank statement is automatically entered.
After all, transactions have been entered the closing balances on your physical bank account statement and the balance of the bank account in your bookkeeping software should be exactly the same. If these two numbers agree it is reasonable to accept that all transactions have been entered into your accounting software if however, they disagree you should look for mistakes. It is often much easier to detect large mistakes than small mistakes. To find mistakes on your bank recon you can scan the bank account looking for the exact amount that is causing the imbalance. If you find any mistake you can simply correct it in your accounting software. Once all mistakes have been corrected the two accounts should have the same balance. If the balances agree the recon process is complete and the bank account can be considered reconciled. The next time that you reconcile the bank account you will begin on the date that your last reconciliation ended.