The best way to reconcile a financial institution assertion to the overall ledger?

The primary objective for this reconciliation is to seek out what’s on one facet not on the opposite. Second objective is to have an actual image of how a lot must be within the financial institution if each transaction (cost or deposit) is cleared within the financial institution.

The financial institution assertion would possibly present roughly than the overall ledger. The reconciliation will work out the distinction.

Any transaction is recorded within the normal ledger however not within the financial institution can be known as excellent transaction. It may be excellent cost or excellent deposit.

There are 3 most important steps.

Let us take a look at the steps:

First we’d like: the financial institution starting steadiness and all transactions in that interval, and the ending steadiness.

Second we’d like the Money account on the whole ledger starting steadiness, all transactions and ending.

Third, we’d like an inventory of all excellent checks and deposits from prior durations to regulate it primarily based on what’s cleared and what’s not cleared on this interval.

Now, we have to see the overall ledger transactions that had been cleared within the financial institution. If there are 10 checks within the GL, 9 are cleared, the tenth is taken into account excellent test. If there are 4 deposits within the GL, 3 are cleared within the financial institution, the fourth is excellent deposit.

Any charges or curiosity within the financial institution must also be recorded within the normal ledger.

Right here is the overall ledger facet:

Starting Steadiness of Money in GL

=Ending Money Steadiness

Then, we have to have a look at the financial institution assertion. We have to have a look at the cleared checks and examine them to what’s written within the present interval and was written in prior durations. If there are 12 cleared checks, we all know 9 are from the present interval. The remaining must be from the excellent checks from the prior durations. After we discover them, we have to alter the excellent checklist. If there may be any cost in financial institution that is not within the normal ledger in any respect, we have to examine and discover out the explanation.

If it is a official cost we might want to file it within the GL.

Additionally deposits, we’ve 5 deposits within the financial institution this era. 3 are from this era. 2 aren’t. They might be deposits made within the earlier month however did not clear within the financial institution until the next month. We additionally want to regulate the excellent deposits and deduct them.

Additionally we have to have a look at charges deducted and curiosity added to ensure they’re recorded within the financial institution. No deposit must be older than one month since deposits are made by the group. A deposit made on the final day of month would possibly take a number of days to be cleared. Checks will be older than one month since they’re cashed by the payee. You by no means know when the payee will money a test.

Now we will do the reconciliation to the financial institution assertion.

Starting Money in Financial institution (from the earlier recon)

• Deposits Cleared within the financial institution

• Checks cleared within the financial institution

• Excellent checks

• Financial institution Charges

= Ending Money in Financial institution

Or it will probably appear like:

Ending Steadiness on the Financial institution Assertion

• Excellent Checks (the final month checklist minus checks cleared on this interval from prior durations + new checks from this era not cleared but)

• Excellent Deposits (the final month checklist minus deposits cleared on this interval from prior durations + deposits made this era not cleared but)

= Money in Financial institution Steadiness

On the finish the Money steadiness in financial institution on the reconciliation ought to equal the Money steadiness on the overall on the reconciliation.

Most techniques can help you monitor the cleared transactions even each day, so you do not have to maintain an exterior checklist.

Lastly, this reconciliation offers the group an thought of its monetary standing. Additionally, it can discover any fraudulent acts or errors made whether or not on the financial institution half or the worker’s half. Many instances financial institution accounts get hacked. With out monitoring and reconciling the checking account, it can maintain taking place.

I hope this helps to grasp how the reconciliation works.

Nader Andrews, MBA, ATP