Example
of the
Bank Reconciliation Process
It's
November 15th and your October bank statement comes
in the mail. The relevant
information is as follows:
-
The automatic
insurance payment that comes out of your account on
the 12th of every month for $87.15 has not been
accounted for in the books.
-
There are bank
charges of $17.65. These have not yet been reflected
in the books.
-
There are two
outstanding checks that were written and mailed on
October 31st: check 171 to your main supplier for
goods ($1,595), and check 184 to the phone company
($127.43).
-
You made a deposit on
October 31st for $395.10 through your bank machine.
It is posted in your account with a November 1st
date.
-
You notice that
one of your checks was processed on your bank
statement for the wrong amount. It should have
been $941.12, and the bank posted it as $914.12.
-
The October 31st
bank balance on your bank statement is
$4,375.14.
-
The bank balance
in your ledger is $3,125.61.
Step 1: Account
for your month-end items
You
must account for the insurance payment and the
bank charges that are not yet in the books.
Doing so will bring your ledger balance down to
$3,020.81 ($3,125.61 - $87.15 - $17.65 = $3,020.81).
Step 2: Call the bank about the bank error
You
may have to show the bank a copy of the canceled
check to get them to correct the error, but you
should make sure they are aware of it as soon as
possible. This error ($27) will now be a
reconciling item on your list.
Step 3: Attempt a
test reconciliation
Now
that you have accounted for those items that you
know about, it's time to see if you can reconcile.
Example of the Bank
Reconciliation Process