A challenging part of accounting can be the bank reconciliation. To some bookkeepers recons are fun, to others, it is nothing but a tedious bore. Whatever way we look at it, it is a function of accounting that must be done. Checks that are processed late, can bounce, if ample provision for it has not been done in the books of the business. But recons, or “check book balancing", is equally important to none business people.
The bank recon is simply the “marrying" of a balance on a bank statement, on a given date , with the balance in your cash book.
Bank charges are added to cashbook payments, outstanding check are deducted, and outstanding deposits are added. Standing or debit orders are added to payments and hopefully the balances will agree. Business should budget for payments from cash book balances, not bank statement balances.
Many numerate people have a grasp of bank reconciliations to some degree. There are occasions that bank reconciliations cannot balance. And this could be ascribed more to missing information, than the skills of the person performing the recon. In such instances the banks statements have to be reconstructed.
A bank statement for a particular period could consist out of several pages depending on the size of the entity concerned. If one page is missing, the reconciliation will not balance. Transactions on the missing page obviously impacts on the outcome of the bank recon.
What if you aware a page is missing, and is in no position to contact the bank for fresh statements. Banks normally archive, statements older than 6 months, and it could cause delays, when copies are requested.
Herewith some guidelines on reformatting your bank statements.
* Check the sequence of the bank statements.
* If a statement is indeed missing, the closing balance, on one page, would differ from the following statements opening balance. Calculate the difference.
* If a difference has been established, scrutinize your check book stubs, to tie that amount to a check number not identified on the statement.
* Verify, recurring payments, such as standing orders, for prior months, and check if that amount cannot be linked to the missing information.
* List all payments, you have the checks stubs, and standing order amounts. Lists all deposits. Add deposits to opening balance. Deduct all payments and compare to final balance. The variance could be unrepresented checks, or bank charges.
* Some bank statements give precise detail on how many checks were processed and the total amounts on the first page. This simplifies the process.
Bank reconciliations can turn out to be challenging, but fun.
Our firm specializes in small business consulting, including cashflow management, business formation and entrepreneurial advice to an international small business community.