How to Read Bank Reconciliation Statements

Sometimes bank reconciliation statements, which are provided by your bank to compare your personal bank account records with the bank's, can be difficult to read at first. However, to avoid bouncing checks and possibly causing an overdraft, you need to make sure there are no discrepancies in your account. You can either use the reconciliation form provided each month with your bank statement or use your own paper or computerized format. Once you understand how to reconcile your personal bank account records with your bank statement, it will be easier for you to use bank reconciliation statements.

Difficulty: Moderate

Instructions

Things You'll Need:

• Bank statement
• Reconciliation form

1. Enter the end-of-month account balance from your bank statement in the designated box at the top of the bank reconciliation statement. The balance is at the end of the transaction list and in the account summary area of the statement.

2. List deposits that you made after the bank issued your bank statement on the reconciliation statement. These deposits should be added to the end-of-month account balance that you placed at the top of the reconciliation statement.

3. List all outstanding checks on the reconciliation statement. These are checks that have not yet been cleared by your financial institution. Include the check number and the dollar amount of each check. When comparing the checks found on the bank statement with the check ledger, place a check mark next to the checks that have cleared the account. Those checks without a check mark are outstanding. Total all outstanding checks at the end of the list.

4. Subtract the outstanding check total from the deposits plus the total bank statement balance that you previously calculated.

5. Record bank fees or credits such as interest paid into your checking account ledger before writing the checking account balance on the reconciliation form. This dollar amount should equal the dollar amount of the reconciliation that you just calculated. If these two numbers are not the same, an error needs to be found.

Tips & Warnings

• Checkbook balances rarely match bank statement balances, so don't become alarmed when you see the difference before reconciliation.
• To avoid bouncing a check and encountering additional fees, do not write checks based on the bank statement balance unless you have balanced your checkbook and come up with the same dollar amount.

References

• Bank Reconciliation: The Accounting Coach
• Business Owner's Toolkit: Bank Reconciliation
• Bank Reconciliation in Microsoft Dynamics GP

[glendavid74]

on 12/1/2009 Which one is better, total amount in cash book is less or the total amount in bank statement is more from amount in cash book.