Monthly bank account reconciliations are vital for protecting both your money and your business. A typical statement lists transactions and the bank balance on the front side and includes a reconciliation worksheet on the back. In addition to balancing account totals, the multi-step process helps you identify errors and discrepancies or may point to potential fraudulent activity taking place in your account during the previous month. Understanding how to reconcile a bank statement manually is important even if you normally reconcile accounts electronically.
Complete a Line-Item Comparison
Find the ending balance on the bank’s reconciliation statement, which most often is on the front side near the top. Record this amount and use it as a starting point. Then complete a line-item comparison in which you match checks, electronic payments, ATM transactions, fees and deposits listed in your register to those listed in each section of the bank statement. Place a check mark next to each matched transaction in your register.
Adjust for Outstanding Amounts
List the amounts for unmatched checks, electronic payments, withdrawals and fees, including the check number or a brief description. Record this number just under the starting balance, subtract it and enter the subtotal. List and total the amounts for unmatched deposits or other credits applied to your account over the previous month. Record and add this number to the subtotal. The ending amount should match the ending balance shown in your register. For example, if your starting point is $600, and you have unmatched transactions totaling $250 and a $100 outstanding deposit, your ending reconciliation and register balance should be $450, or $600 - $250 + $100.
Troubleshooting Reconciliation Errors
Most errors result from incorrectly recording the bank statement balance, missing or incorrectly matching transactions or transposing numbers. However, they can also result from bank statement errors. Review your lists of outstanding transactions and deposits to make sure it includes only unmatched transactions, complete another line item comparison and check your calculations. If the account still doesn’t balance, review the statement with a banking representative to see if the problem lies with your bank.
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