A bank reconciliation is a process a business goes through to make sure its records (check register, general ledger account, balance sheet, etc.) are correct. This is done by comparing the company's recorded amounts with the amounts shown on the bank statement. Any difference must be justified. When there are no unexplained differences, the accountants declare that the bank statement has been reconciled.

Bank reconciliation is an important part of a company's internal controls over its assets. To be effective, it must be done by someone other than an authorized check signer and/or registrar.

Example of a bank reconciliation

Suppose a new business opens its first checking account on June 4 with a deposit of $10,000. During the month of June, the company wrote five checks for a total of $5,000. He also made a $2,000 deposit in the bank's night deposit after banking hours on June 30. As a result, the company's cash account (on its ledger and called "books") as of June 30 shows a positive debit balance. of $7,000.

The bank statement shows a balance as of June 30 of $5,975. Note that this balance is different from the company's general ledger cash account balance of $7,000. In general, neither balance is the correct amount of cash that should be reported on the company's balance sheet through transaction reconciliation platform.

To reconcile the balance of the company and the balance of the bank it is necessary to compare the details. To illustrate, suppose that:

• The bank statement shows a bank service charge of $25, but the company ledger does not

• The $2,000 deposit made by the company on June 30 does not appear on the bank statement

• One of the five company checks issued in June for $1,000 does not appear on the bank statement

We prefer to perform the bank reconciliation by adjusting both the business cash balance and the bank statement balance to be the correct amount of the business checking account balance, as shown here:

• The business cash account balance of $7,000 must be reduced by $25 for the bank service charge. As a result, the company's adjusted book balance from digital reconciliation solution is $6,975. This is the amount that the business can report on its balance sheet if it accepts the bank-adjusted balance.

• The bank statement balance of $5,975 should be increased for the $2,000 deposit and decreased for the $1,000 check. After these adjustments, the bank-adjusted balance is $6,975 ($5,975 + $2,000 - $1,000).

Since both the company's books and bank statement have an adjusted balance of $6,975, the bank statement has been reconciled.

About Us

CAMS Recon DynamiX is a robust, fully automated software for seamless reconciliation of general ledgers, payments and transactions bringing operational efficiency and ease to the complex activity of payments and settlements. Errors are detected before they become problems, delays and attendant risks are driven down. Data translation, rules-based matching and investigative tools enable real-time analytics to monitor multi-level process status at enhanced speed, transparency and security.

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