A challenging part of bookkeeping can be bank reconciliation. For some bookkeepers, recognition is fun, for others, it’s just a tedious bore. Whichever way you look at it, it’s an accounting function that needs to be done. Checks that are processed late can bounce, if ample provision has not been made for it in the company’s books. But recons, or “balancing of checks,” is just as important to business people.
Bank recognition is simply the “matching” of a balance on a bank statement, on a certain date, with the balance in your cash book.
Bank charges are added to cash book payments, outstanding checks are deducted, and outstanding deposits are added. Standing or debit orders are added to the payments and hopefully the balances will agree. Businesses should budget payments from cash book balances, not bank statement balances.
Many people have some degree of understanding of bank reconciliations. There are occasions that bank reconciliations cannot balance. And this could be attributed more to missing information than to the skills of the person doing the reconnaissance. In such cases, bank statements have to be reconstructed.
A bank statement for a particular period could consist of several pages, depending on the size of the entity in question. If a page is missing, the reconciliation will not balance. Transactions on the missing page obviously impact the result of the bank recognition.
What if you know a page is missing and you can’t contact the bank to get new statements? Banks typically archive statements that are more than 6 months old, which could cause delays when copies are requested.
Here with some guidelines for reformatting your bank statements.
* Check the sequence of bank statements.
* If a statement is indeed missing, the closing balance, on one page, will differ from the opening balance of subsequent statements. Calculate the difference.
* If a difference has been established, look at your checkbook stubs to link that amount to a check number not identified on the statement.
* Verify recurring payments, such as standing orders, from previous months, and verify if that amount cannot be linked to the missing information.
* List all payments, have check stubs and standing order amounts. List all deposits. Add deposits to beginning balance. Deduct all payments and compare to the final balance. The variance could be unrepresented checks or bank charges.
* Some bank statements provide precise details on how many checks were processed and the total amounts on the first page. This simplifies the process.
Bank reconciliations can be challenging, but fun.