Steps to Reconcile a Bank Statement

On of my student is doing the duty of accounting in India's Top Educational College. In his accounting department, there are many sub-divisions. One of important divisions is Bank Reconciliation Division. His duty is to reconcile bank a statement with college's cash book every week. This shows that bank reconciliation is the important function of accounting department of any organisation. It is very helpful to reduce the mistakes relating to cash book and bank passbook.

Now, I am teaching you its simple steps:

1st Step : Check Debit Side of Company's Cash Book/Bank Account with Bank Statement

Our company's bank account or cash book's debit will be the receipt side. It will show in the credit side of bank statement. Whether all checks which have been deposited into bank are collected any showing bank statement. Date is important. Our cash book balance is not matching because check are still in collection or transit. This may happen. Once, I deposited an outstation check and it deposited in my saving account after 30 days. Why? Because bank manager was going for marriage holidays!! I am joking. Actually, the employee whose duty was to send my check for collection forgot to send. Same type mistake may be happen in your bank also. So,  take a page and deduct this balance from your cash book's balance. It will be helpful to reconcile.

2nd Step : Check Credit Side of Company's Cash book/ Bank Account with Bank Statements:

Company's cash book's credit side will show the total amount of payments. If checks have been issued for payment but not cleared by bank as per bank statement, this amount will be added in our cash book's closing balance. It will also help to reconcile a bank statement.

3rd Step : Check Arithmetic Correctness of Cash book and Bank statements

Sometime, bank employees become lazy and write our 10,000 receipt as Rs. 1000. Sometime, it may be possible that our assistant did any mathematical mistake in cash book. So, try to find and adjust for reconciliation of your cash book with bank statement.

4th Step : Match Other Items of Bank Statements with Cash book

Sometime bank credits interest on our different accounts in bank or cut the bank charges. At that time, our cash book balance will not match with bank pass book and bank statement shows excess or less balance. In such case, you have to adjust our cash book's balance according to this.

5th Step : Use Advance Technique of Computer Accounting 

Above steps, you can check manual accounting system but if you are using computer accounting, you have one of very advance option and its name is Reconcile. You just add bank dates*  and your computer accounting system will automatically reconcile all your bank related transaction. After this, your cash book balance will be shown equal to your bank statement.

{Important Note : Bank dates mean that dates which you can find from bank statement. Suppose, you deposit a check on 2-3-2010 but bank credited same amount on 2-4-2010 and it has been mentioned on bank statement. So bank date is 2-4-2010}

I am providing its video tutorial at here and its screenshot has been given below.


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Accounting Education: Steps to Reconcile a Bank Statement
Steps to Reconcile a Bank Statement
Accounting Education
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