How to Reconcile a Bank Balance

Video Transcript

"In this clip we're going to talk about, how to reconcile a bank statement. Reconciling a bank statement simply means taking the information that you have recorded in your general ledger, or what you think your balance is, verses what the bank says your balance is. Generally it means that the bank says you have more money than you do, because you've written checks that the bank has not cleared, it's a pretty simple process and I'm going to show you how to do a really simple bank reconciliation. Up top we have our general ledger balance, and that simply means how much money do we think we have in the bank. Next, we have the bank balance, and that's per the statement we received from the bank. In order to get from what our balance is, verses what the bank balance is, we have to think about the things that are different between those two items. What is different is that we have checks we've written of 400 dollars that the bank has not cleared, and we have received a deposit of 600 dollars which we took to the bank but the bank has not yet cleared, therefore these two items are not included in the 1500 dollar balance. So in order to get from our balance to the bank balance, we would have to take the bank balance minus the uncleared checks plus our deposits, and that gets us to a matching 1700 dollars, that way we know that we're matching what the bank has, the difference is 0. And that's how you do a bank reconciliation."