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Below is an excerpt
from Chapter 4 of:
"Basic Bookkeeping for Beginners & Small Businesses"
How To Do A Bank Reconciliation
Every business and individual receives
a bank statement for every checking account. Although rare, banks do make errors,
so it is very important to reconcile the bank statement to the amount you show
in the check book.
Step 1:
Compare the amount that each cancelled
check is written for against the amount that was deducted from the bank statement
for that check. Place a “check mark” next to each entry on the bank
statement if it matches.
If the amount of money the check
was written for is different from the amount shown on the statement, look at the
MICR codes printed by the bank along the bottom of the check. The last number
on the right hand side, below the signature line, is the amount the check was
cashed for. If it does not match the amount that you wrote on the check, contact
the bank immediately. Make a photocopy of the check and give the original incorrectly
coded check to the bank so they can correct their error.
The MICR code, those funny looking
numbers printed across the bottom of every check, consists of: the check number,
bank routing number, bank account number and the amount of the check in dollars
and cents.
Step 2:
Put all of the cancelled checks in
numerical order. Compare the amount that each check was written for to the amount
entered into your bookkeeping. If the amounts match, place a “check mark”
next to the amount in your bookkeeping.
It is important that you compare
the cancelled checks to the amounts entered into the bookkeeping and not the amounts
entered into your check register. This will find any posting errors from the check
register to your bookkeeping.
Step 3:
Enter the check # and amount of any
check written and posted in your bookkeeping that was not returned in your bank
statement in the “outstanding checks” portion of the bank reconciliation.
Step 4:
Compare all of the bank deposits
listed in your bookkeeping to the bank deposits listed on the bank statement.
Again, place a “check mark” next to every deposit on the bank statement
that matches the amounts in your bookkeeping.
If any bank deposits made during
the month are not listed on your bank statement, look at the deposit receipt date
to see if it was deposited during the month. If it was, and it is not on the statement,
contact the bank immediately.
Step 5:
Enter the date and amount of each
deposit that is entered in your bookkeeping but not deposited into the bank in
the “deposits not recorded by bank” section of the bank reconciliation.
Step 6:
Enter any service charges, NSF (non-sufficient
funds or more commonly referred to as bounced) checks, differences between check
& stub and differences in deposits into the proper lines on the bank reconciliation.
Calculate the adjusted balance in each section of the reconciliation. The bank
reconciliation balance should equal your check register balance. If it doesn’t,
begin looking for the errors.
(See Figure #17)
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