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How to Complete a Bank Reconciliation Step By Step
Although accounting software is very popular with small business owners, businesses still need to regularly compare their bank statements with their personal records. This process, known as bank reconciliation, ensures that business records are correct and helps the business detect discrepancies, errors, or fraudulent charges. In this article, we'll define what bank reconciliation is, provide the steps to achieve it, list some common issues encountered when reconciling records, and give an example of a bank reconciliation.

What is bank reconciliation?

Bank reconciliation refers to the process of comparing a company's books to its bank statements to ensure all transactions are accounted for. The process is a helpful way to keep accurate records, protect against fraudulent charges, and resolve any other discrepancies or issues. Most businesses do bank reconciliation app at the end of each month, however, the frequency largely depends on the size of the business and the number of transactions that take place. For example, some larger companies find it necessary to reconcile their records every day.

Regardless of the frequency, the bank reconciliation platform must be completed periodically. Although some businesses still keep their records manually, there is accounting software that makes the process simple and efficient. Most of these programs integrate the company's bank accounts, providing all data and records in one place.

How to complete a bank reconciliation procedure

1. Get bank records

To reconcile your records, you will need access to a list of your transactions. You can get this information through online banking, a bank statement, or by letting your bank share data with your accounting software.

2. Gather your business records

You will also need access to your company's general ledger or books. Typically, this information is stored in a spreadsheet, logbook, or accounting program.

3. Find a place to start

Where you start will depend on when you last balanced your books. If you're not sure, try to identify the last time your books matched your bank account balance and start from there.

4. Review your bank deposits and withdrawals

Make sure all your bank deposits and withdrawals are posted to your bank statement. If an element is missing, you will need to add it.

5. Check the income and expenses in your books

Check your books against bank statements and make sure every transaction is accounted for correctly. If there is an item that does not match, find out why. Maybe a payment hasn't cleared yet or you forgot you paid cash for something.

6. Adjust bank statements

There are times when a bank statement will not accurately reflect a company's transactions. Common causes can be outstanding checks, bank errors, or deposits that are still in transit. Whatever the reason, make the necessary changes to the bank statement.

7. Adjust cash balance

You will also need to adjust your records to accurately reflect all business transactions. You will do this by ensuring that all charges and deposits are posted to the company's cash account.

8. Compare ending balances

Once you've cross-checked the records and made any adjustments, you'll need to confirm that the ending balances are now the same and the payment reconciliation app process should be complete. If they are still uneven, you will need to repeat the process to find the error.

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