Do you find yourself puzzled when it comes to reconciling your bank transactions with your accounting records? Well, you are not the lone one. Who does not feel overwhelmed with managing finances overall? Yes, it is an integral part of running your business but maintaining accurate financial records is something that can be challenging, especially when we talk about reconciling bank transactions.

When you reconcile your band transactions with your accounting records, you can easily know where the discrepancies are and it also helps in maintaining the integrity of your financial data. That’s why we decided to deliver you an in-depth insight into how to prepare bank reconciliation statements so that you know the required knowledge to streamline your financial management. 

Step 1: Gather the Necessary Documents

To begin with, make sure you gather the following documents:

1. Bank statements: Get the latest bank statement for the relevant period.
2. Cash book or accounting software: Collect the accounting records that have the cash transactions. 

Step 2: Compare Transactions

Now you have to carefully look at the transactions listed and compare them in your cash book or accounting tool with the corresponding entries on the bank statement. Make sure that each transaction matches and is for the same period. 

Step 3: Identify Discrepancies

So when you compare minutely, you got to check out for any discrepancies between the bank statement and your accounting records. A few of the common ones may include: 

1. Bank charges or fees not recorded in the cash book.
2. Outstanding checks or payments that are yet to be cleared by the bank.
3. Deposits or payments are recorded in the cash book but not reflected in the bank statement.

Step 4: Adjust the Cash Book

Now that you identified discrepancies, it’s time to make the necessary adjustments to your cash book or accounting tool. A few common ones might include:

1. Adding bank charges or fees to the cash book.
2. Subtracting outstanding checks from the cash book balance.
3. Adding deposits or payments not yet reflected in the bank statement.

Step 5: Calculate the Adjusted Balance

Now that you have made the adjustments, you have to calculate the adjusted balance in your cash book by adding or subtracting the necessary amounts. Make sure the adjusted balance matches the bank statement’s ending balance. 

Step 6: Prepare the Reconciliation Statement

Using the adjusted balance from your cash book, prepare a reconciliation statement. The statement should list the following:

1. Opening balance: The balance from the previous reconciliation statement.
2. Deposits: Total deposits recorded in the cash book but not yet reflected in the bank statement.
3. Deductions: Any outstanding checks or payments that have not been cleared by the bank.
4. Bank charges or fees: Any charges or fees incurred but not recorded in the cash book.
5. Adjusted balance: The adjusted balance after considering all the necessary adjustments.

Step 7: Reconcile the Statement

It’s time to compare the adjusted balance from the reconciliation statement with the ending balance of the bank statement. Make sure that the records and the bank records are in agreement. 

Step 8: Investigate Unresolved Discrepancies

Now that there is a scenario where the adjusted balance and the ending balance on the bank statement do not match, once again thoroughly check out any unresolved discrepancies. 

Conclusion

Now that you have known to prepare a bank reconciliation statement, it’s time to deliver our final take on it. First of all, make sure you follow the steps outlined in this blog post so that you can ensure accuracy for your financial records and check out any discrepancies that may require attention. Furthermore, if you require any assistance with that, you can rely on KPG Taxation and its expert tax return accountants who can help you navigate these bank reconciliation statements so that you can make informed business decisions and minimise the risk of errors or fraud.