Balance Per Bank
The first step in a bank reconciliation is to adjust the balance reported by your bank. The amount shown on your bank statement isn’t always the same as what you have recorded due to the timing of financial transactions. For example, cheques you submitted to pay invoices or other bills may not have cleared the bank yet. Your bank account still shows you have that money even though your books show that you’ve made the payment.
Your bank account balance may show lower than your records if a deposit you made hasn’t been processed yet. To ensure it’s just a timing issue and not an error, you need to make adjustments to the bank statement balance to account for those transactions.
The easiest way to adjust your reported bank balance is to note the ending balance in a spreadsheet and manually adjust the figure. Adjusting the bank balance portion of the bank reconciliation doesn’t require you to adjust entries, you just need to make manual changes to the figure reported by the bank. Follow these steps:
- Start your adjustments with the ending balance shown on your bank statement.
- Add the balance of deposits in transit to your starting balance. These outstanding cheques are items you’ve received and accounted for but are still on the way to the bank for deposit and don’t show in your bank balance yet.
- Deduct the balance of outstanding cheques from your account that haven’t cleared yet. In your records, you’ve already recorded that you’ve made payments. Since the cheques haven’t been cashed yet, you need to subtract them from your bank balance to make that amount match your financial records.
- Check for errors on the part of your bank. If you notice incorrect deposits or typos, alert your bank to perform the proper adjustments.