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The Corporate Finance Institute Accounting
Bank Reconciliations
A bank reconciliation is a document that matches the cash balance
To learn more, please in the company’s books to the corresponding amount on its bank
check out our free online statement. Bank reconciliations are completed at regular intervals
accounting courses
to ensure that the company’s cash records are correct. Bank
reconciliations also help detect fraud and any cash manipulations.
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When banks send companies a bank statement that contains the
company’s beginning cash balances, transactions during the period, and
ending cash balance, almost always, the company’s ending cash balance
and the bank’s ending cash balance will never be the same. Some
reasons for this difference may be due to any deposits in transit such as
cash and cheques that have been received and recorded but have not
yet been recorded in the bank records, outstanding cheques, or bank
service fees.
Bank Reconciliation Procedure:
1. Start with the bank’s ending cash balance
2. Add: Any deposits in transit
3. Deduct: Any cheques that have not yet been cleared (i.e. outstanding
cheques)
4. Go to the company’s ending cash balance and deduct any bank
service fees and penalties and add any interest earned
5. At the end, the adjusted bank balance should equal the company’s
ending adjusted cash balance
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