It could be that there has been an error in one of the statements or a mistake in recording transactions. If so, then they should both be corrected and revised until they are consistent. You may also need to adjust your accounting records to bring them back into balance. Sometimes your current bank account balance is not a true representation of cash available to you, especially if you have transactions that have not settled yet. If you’re not careful, your business checking account could be subject to overdraft fees.

In the absence of proper bank reconciliation, the cash balances in your bank accounts could be much lower than expected, which may result in bounced checks or overdraft fees. Before you reconcile your bank account, you’ll need to ensure that you’ve recorded all transactions from your business until the date of your bank statement. If you have access to online banking, you can download the bank statements when conducting a bank reconciliation at regular intervals rather than manually entering the information. When all these adjustments have been made to the books of accounts, the balance as per the cash book must match that of the passbook. If both the balances are equal, it means the bank reconciliation statement has been prepared correctly.

Next steps: Review past reconciliations

Once you determine the differences between the balance as per the cash book and the balance as per the passbook, you’ll need work out the balance as per the bank portion of the bank reconciliation statement. There are times when the bank may charge a fee for maintaining your account, which will typically be deducted automatically from your account. Therefore, when preparing a bank reconciliation statement you must account for any fees deducted from your account. Make sure that you’ve also taken into account all deposits and withdrawals to an account when preparing the bank reconciliation statement. If you want to prepare a bank reconciliation statement using either of these approaches, you can use the balance as per the cash book or balance as per the passbook as your starting point.

1. To see all of your adjustments on the list, you can review a Previous Reconciliation report for the reconciliation you adjusted.
2. This is especially common in cases where the check is deposited at a different bank branch than the one at which your account is maintained, which can lead to the difference between the balances.
3. There will be very few bank-only transactions to be aware of, and they’re often grouped together at the bottom of your bank statement.
4. As a small business, you may find yourself paying vendors and creditors by issuing check payments.
5. Deposits in transit, or outstanding deposits, are not showcased in the bank statement on the reconciliation date.

Checks Deposited or Bills Discounted Dishonored

Since all of your transaction info comes directly from your bank, reconciling should be a breeze. These checks are the ones that have been issued by your business, but the recipient has not presented them to the bank for the collection of payment. After adjusting all the above items what you’ll get is the adjusted balance of the cash book. This means that the company’s bank balance is greater than the balance reflected in the cash book. It’s challenging because you have to reconcile some accounts manually. You may be required to use paper and pencils, which is so last century.

Step 1: Match Each Item on the Bank Statement to the Cash Account

We recommend setting the opening balance at the beginning of a bank statement. If you’re reconciling an account for the first time, review the opening balance. It needs to match the balance of your real-life bank account for the day you decided to start tracking transactions in QuickBooks. As a result, you’ll need to deduct the amount of these checks from the balance. The purpose of reconciling bank statements with your business’ cash book is to ensure that the balance depreciation calculator as per the passbook matches the balance as per the cash book.

It is important to note that it takes a few days for the bank to clear the checks. This is especially common in cases where the check is deposited at a different bank branch than the one at which your account is maintained, which can lead to the difference between the balances. When your business receives checks from its customers, these amounts are recorded immediately on the debit side of the cash book so the balance as per the cash book increases. However, there may be a situation where the bank credits your business account only when the checks are actually realised.

Reconciling an account can take hours, while every minute counts when it comes to running your business. There are apps for doing bookkeeping, like QuickBooks Online, but they don’t replace critical thinking and years of experience that you can get when outsourcing to an accounting firm. For a more hands-off reconciliation experience, QuickBooks can help. We offer reconciliation reports, discrepancy identification, and live accountants to work with for ease and confidence when closing your books. Once you’re done, you should see a difference of $0, which means your books are balanced.