Bank Reconciliation

by

What is Bank Reconciliation?

Bank reconciliation is a vital process that ensures your financial records are accurate and in sync with your bank statements. It involves comparing your bank’s records with your own, identifying discrepancies, and resolving any differences. This step is crucial for maintaining accurate accounts and catching potential errors early.

Steps to Perform a Bank Reconciliation

To perform a successful bank reconciliation, follow these simple steps:

  1. Gather your bank statement and your financial records.
  2. Compare each transaction on your bank statement with your own records, checking for inaccuracies.
  3. Identify any discrepancies, such as missing transactions or errors in entries.
  4. Make necessary adjustments in your records to correct any errors.
  5. Ensure the ending balance in your records matches your bank statement.

Why is Bank Reconciliation Important?

➡ Detects errors and fraud

➡ Ensures all cash transactions are recorded

➡ Confirms the actual bank balance

➡ Identifies unrecorded items like bank charges, interest, or direct deposits

Documents Involved:

✅ 1. Cash Book (Company’s internal records)

✅ 2. Bank Statement (External bank records)

Common Reasons for Differences:

💡 Outstanding Checks – Issued but not yet cleared

💡 Deposits in Transit – Deposits made but not yet reflected in the bank

💡 Bank Charges Fees – charged by the bank, not in books

💡 Direct Deposits/Collections – Bank deposits not recorded in books

💡 Errors – In cash book or bank statement

Steps in Bank Reconciliation Process:

1. Obtain bank statement and cash book

2. Compare deposits – check for deposits in transit

3. Match withdrawals – identify outstanding checks

4. Identify bank-only transactions:

* Bank fees

* Direct debits or credits

* Interest income

5. Record journal entries for unrecorded items

6. Prepare bank reconciliation statement

7. Adjust cash book balance to match reconciled balance

Sample Bank Reconciliation Statement Format:

Bank Reconciliation Statement as on [Date]

Balance as per Cash Book: ₹XX,XXX

Add: Deposits in Transit ₹X,XXX

Less: Outstanding Checks ₹X,XXX

Add/Less: Bank Errors ±₹X,XXX

Adjusted Bank Balance: ₹XX,XXX

Journal Entries (for adjustments):

➡ Bank Charges

Dr. Bank Charges A/c

Cr. Bank A/c

➡ Interest Income

Dr. Bank A/c

Cr. Interest Income A/c

➡ Direct Debit for payment

Dr. Expense A/c

Cr. Bank A/c

➡ Dishonored Cheque

Dr. Debtor A/c

Cr. Bank A/c

BRS SAP T Codes list

✔ FF67 – Manual Bank Statement Entry

✔ FF.5 – Upload Electronic Bank Statement

✔ FEBA – Postprocess Bank Statement

✔ FF6A – Bank Statement Display

✔ FBL3N – Display GL Line Items

✔ FS10N – Display GL Account Balance

Leave a Comment