Bank Reconciliation: Bookkeeping Entries Versus Bank Statements
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Bank Reconciliation: Bookkeeping Entries Versus Bank Statements

The debit and credit entries in the book of accounts should correspond to the credit and debit entries in the bank statements. If they are not matched, then there is a need for bank reconciliation. The factors affecting bank reconciliation should be determined in order to come up with the appropriate action in the reconciliation of accounts.

Bookkeeping Entries for bank accounts should match the bank statements in order to come up with bank reconciliation. The debit and credit entries in the book of accounts should correspond to the credit and debit entries in the bank statements. The ending balances in the books should match with the ending balances per bank statements. If they are not matched, then there is a need for bank reconciliation.

The bank reconciliation report is the result in reconciling the book balances versus the bank statements. There are factors to consider when preparing the bank reconciliation report. Some of the factors are the following:

  • Reconciling items in Bank Reconciliation– These are deposits in transit, outstanding released checks, unidentified deposits, other book debits or credits and other bank debits and credits. The term books or book of accounts may refer to a manual ledger or computerized accounting software. Bank statement may refer to the monthly bank account statements or the summary of debits and credits in the passbook.
    • Deposits in transit in bank reconciliation are payments collected or income received that are still within bank clearing days that are not yet credited to your account but are already recorded as part of your account in your books.
    •  Outstanding released checks in bank reconciliation are checks already released to supplier, vendor or payees but are not yet deposited or encashed in the bank.
    • Unidentified deposits in bank reconciliation are deposits credited to your account and already reflected in your bank statements but are unidentifiable yet as to its source (whether from a customer or not), that is why no entry yet in your books.
    • Other book debits or credits in bank reconciliation are entries in your book of accounts that are not yet reflected in the bank statements. These may refer to fund transfers already recorded in the books but not yet reflected in the banks. 
    • Other bank debits or credits in bank reconciliation are entries in the bank statements or passbook for the amount of interest earned that is directly credited to your account or the final withholding tax and other surcharges and fees that are directly debited to your account.
  • Erroneous amount entry in Bank Reconciliation– This may result to error in transposition, typographical error, error in omission, double entry in the books of account. Most accounting books and references would prefer the bank statements over bookkeeping entries in terms of accuracy. This means that, the balances per bank statements are the bases in determining the accurate ending balances for bank reconciliation purposes rather than the account balances in your books.
    • Error in transposition in bank reconciliation can be easily determined if the reconciling difference is divisible by 9. There and then you may suspect that the reason behind the error is transposition.
    • Typographical error in bank reconciliation happens when a debited or credited amount is erroneously inputted. This usually happens with manual bookkeeping entries of debits and credits are done than downloading of online banking entries.
    • Error in omission in bank reconciliation exists when an entry is unintentionally omitted.
    • Double entry in the books of accounts usually happens when duplicated downloading of online bank account entries is done. When maintaining manual bookkeeping of entries cut-off period should be clearly defined to avoid double entries of certain transactions.
  • Erroneous Account Entry in Bank Reconciliation – This is usually experienced when you have different types of accounts such as savings, checking and or line of credits to other different kinds of banks. Some debit or credit entries are posted in other banks especially if you are only relying upon the receipts with little data as to the bank account from where it is debited or deposited.
  • Erroneous Entry of Amount in decimals in Bank Reconciliation – The hardest part in bank reconciliation is finding the difference especially if it the reconciling item is only 1/100 or similar amounts of debits and credits. You have to establish the materiality of amounts. Determining materiality can be done through creating upper and lower limits of amounts for adjustments. This is true for accounts having bulk and large quantity of transactions. Creating the upper and lower limits can save time and effort in finding the least amount of difference. After determining the limits, you can already adjust the amount and charge them to income or expense accounts.

These are only few of the factors to be considered in bank reconciliation. Most accounting software has established bank reconciliation tool to make bank reconciliation easier. This is a very complicated yet challenging task. A diligent bookkeeper or accountant who can test his patience is therefore required in order to reconcile bookkeeping entries versus bank statements.

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Comments (9)

Thank you Jeannette for this post on book-keeping. Nice details. I shall come again. Today I am exhausted of votes. Thanks for friendship.

Wow, your information is vital and very well presented.

Thanks Sir Paulose and Martin. It's my pleasure to have created more detailed articles that can be understood even for non-accountants =)

Good and practical information. Sometimes it's hard to get all those figures to match. Voted up.

Yes, Vickie, but I have a lot more patience when it comes to bank reconciliation than article writing. I want to have that passion that you guys are having. Keep it up!

I've always been much better at writing than math, Jeanette. I have zero patience for juggling numbers. So your articles are very helpful.

Very good information. I dropped out of my accounting class. It was too difficult for me. I understood most of what you mentioned here.

It's a great fulfillment when I reconciled bank accounts and yes very challenging, too. I guess we have different expertise here and I found the right place in the Factoidz community where I can read and share each other's knowledge from different topics. I am glad to have gained more friends here. Thanks for all your inspiring comments. I love them! =)

There is an old saying, "If it can’t be measured, it can’t be managed." Every business, whether big or small, must have a bookkeeping system in place as it is the only way know whether it is making a profit or loss. I am impressed with the way you have shared these worthy tips. :)

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