Bank Reconciliation – Bank Reconciliation Account

In summary, we can say that bank reconciliation is the total of all records of transactions that involves checking account. However, it is the process by which the bank account balance in an entity’s books of account is reconciled to the balance reported by the financial institution in the most recent bank statement. We bring to you process on how to go about in your Bank Reconciliation.

Pro tip: Adjusting the Balance per Bank

In several steps, we will explain what bank reconciliation could look like. The first step is to adjust the balance on the bank statement to the true, adjusted, or corrected balance.  Items involved in this process are Deposit in transit, outstanding checks, bank errors, as regards to the balance per bank statement on Aug.31, 2020.

However, trying to adjust the balance per bank, the Deposit in transit which is the amounts already received should be recorded by the company even though it may not have been recorded by the bank. For example, a business can deposit its cash receipts of August 31 into the bank’s night depository at 10:00 p.m. on August 31. But the transaction will be processed and recorded as a deposit on the morning of September 1. But the initial deposit date is august 31.

As though the deposit in transit is on the company’s books, but it isn’t on the bank statement.  Follow the rule of thumb that says “put it where it isn’t.” as an adjustment to the balance on the bank statement.

Also, the Outstanding checks are checks that have been written and recorded in the company’s Cash account, yet they have not cleared the bank account.  But those Checks are written within the last few days of the month and older checks are among outstanding checks. During the last few days of the month plus a few older checks are likely to be among the outstanding checks.

Because all checks that have been written are immediately recorded in the company’s Cash account, there is no need to adjust the company’s records for the outstanding checks. Thus, the outstanding checks have not yet reached the bank and the bank statement. This will be listed in the bank reconciliation as a decrease in the balance per bank.


  • Thus, Put it where it isn’t: as an adjustment to the balance on the bank statement because an outstanding check is on the company’s books, but it isn’t on the bank statement.

Now the Bank errors involved are mistakes made by the bank. Bank errors could include the bank recording an incorrect amount, entering an amount that does not belong on a company’s bank statement, or omitting an amount from a company’s bank statement. The company should notify the bank of its errors. Depending on the error, the correction could increase or decrease the balance shown on the bank statement. (Since the company did not make the error, the company’s records are not changed).

The second step of bank reconciliation is to adjust the balance of the company’s cash account per book. Here are what that are involved; bank charges, check printing charges, interest earned, notes receivable collected by the bank, Errors in the company’s cash account, NSF checks & fees.

Comparing the Adjusted Balances

At the end of the check and balances, the balances should be the true, correct amount of cash as of the date of the bank reconciliation.


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