How to Prepare a Bank Reconciliation Statement
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How to Prepare a Bank Reconciliation Statement

Procedures on how to Prepare a bank reconciliation statement

In preparing a bank reconciliation statement, the first thing to consider is its elements. A person must be of full knowledge with the structure of the elements of bank reconciliation- The Bank Statement, the Company’s Book Balance and the related Reconciling items. The reason for this is that the elements will serve as the structure and the basis for proper bank reconciliation.

If a person understands the elements of bank reconciliation, the next thing he should do is to analyze the problem, and follow the general procedures relating to it. The general procedures are:

1. Determining the balance per book and the balance per bank

-The balance per book is the cash in bank account on the book of the depositor and the balance per bank is the bank balance shown in the bank statement and shown as the final item. These balances are quite easy to see because it only reflects the balance of your record and the balance of your bank statement.

2. Tracing the cash receipts to the bank statement to ascertain whether there are deposits not yet acknowledged by the bank

-If the cash receipt recorded in the depositor’s account does not appear in the bank statement, it is added to the bank balance section of the bank reconciliation and is considered as deposit in transit.

3. Tracing the checks issued to the bank statement ascertain whether there are checks not yet presented for payment

-if checks recorded in the depositor’s account does not appear in the bank statement, it is deducted to the bank balance section of the bank reconciliation and is considered as outstanding checks.

4. Examining the bank statement in order to know the bank credits or bank debits not yet recorded by the depositor.

- Bank credits and debits not yet recorded by the depositor are called Credit and Debit Memos. Credit memos are added to the book balance section of the bank reconciliation while Debit Memos are deducted to the book balance section of the bank reconciliation. Credit Memos include Notes receivable collected by bank in favor of the depositor, and proceeds of bank loan credited to the account of the depositor. Debit Memos include NSF checks, technically defective checks, bank service charges and reduction of loan.

5. Looking out for errors. Remember,errors are reconciling items of the party which committed the error.

Always remember that bank reconciliation is the statement which brings into agreement the cash balance per book and the cash balance per bank. Thus, the cash balance per book and the cash balance per bank should be equal. If they do not coincide, then definitely your bank reconciliation is done incorrectly.

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Comments (5)

Another informative article on the series. Thanks kabayan.

Thank you deep :D

I see you becoming an expert here in factoidz, wonderful post! Keep up the good work kabayan!

In my country, the bank I have an account with doesn't issue bank books anymore. So we need to go online in order to check the balance in our account or go to the bank to request for a statement. It's quite troublesome and I'm always a little wary about doing online banking but then that's how the bank works. What to do?

joecy

bank reconciliation has always been a hard topic but since i met this matrial i have started enjoying it thanks.

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