Reconciling your payroll bank account is the process of comparing the general ledger payroll account balance to your bank statement. The difference between the two balances may be due to checks issued that have not yet cleared the bank, timing differences between your accounting month and the bank statement ending date or errors on either the bank statement or postings in your general ledger. Reconciling the payroll bank account can be a simple process, or may be more complicated, depending on the complexity and size of your payroll.
Things You Will Need
General Ledger activity report
Prepare a spreadsheet. Use the first column of your spreadsheet to enter descriptions for your line items. Use the second column to enter the amount for each line item.
On the first row enter the description “Balance per Bank” and in the amount column enter the ending balance per your bank statement.
List the adjustments to your bank balance on the next rows giving each a unique description and an amount.
Total your bank balance and all your adjustments. When this sum equals your general ledger balance, you have completed the reconciliation. Enter the description “Balance per General Ledger” on the last row of the reconciliation. Show the amount for this row with a double underline to indicate it is the grand total.
Resolve adjustments that are not simply timing differences by either booking a correcting entry to your general ledger or contacting your bank if they have made an error in your account.
Compare the checks issued per your payroll reports to the checks that have cleared the bank to identify the outstanding checks. Enter the total of all outstanding checks as a negative number. Your bank may provide you with a listing of the outstanding checks.
Verify that the amount of direct deposits issued and posted to your general ledger equal the amount the bank debited to your account for direct deposits. If the bank statement does not show a direct deposit issued that you have already posted in the general ledger enter it as a positive adjustment.
List any bank fees included on your bank statement but not recorded in your general ledger as a positive adjustment. Prepare an entry to your general ledger to the record the fees.
Compare the amount withdrawn from your payroll cash account for payroll taxes to the amount of payroll tax liability you posted to the general ledger. If the amount taken from the bank differs, enter the difference as an adjustment. If the bank withdrawal is higher, you should enter the difference as a positive adjustment.
The bottom line of your reconciliation must be the balance per the general ledger.
To make your reconciliation look professional include a report heading, column headings, notes to explain how and when reconciling items will clear, who prepared the reconciliation and list the supporting documentation you used as well as where the soft copy of the spreadsheet file is located.
Resolve reconciling items before the end of the next accounting period. If you have reconciling items from the prior period that remain unresolved, include those in an Adjustments section of your current reconciliation and all future reconciliations until resolved.