5 Bank Reconciliation Examples
Bank reconciliation is a financial process used to compare the balances reported in an organization’s financial records with that of its associated bank account. It is usually done to ensure that the monies reported in the books and records of the business are accurate and match with the bank’s records of the account balance. In these Bank reconciliation examples you will be able to see how to identify and correct errors which can occur in bookkeeping.
The comparison of the bank statement and a company’s financial data can help spot any thefts, frauds, and management errors.
The names in the bank reconciliation examples are fictional
Bank reconciliation examples
Example 1: Mr. James Miller is a business man who runs a small retail business. He has a bank account with Sun Bank and the balance in his books of bank as on 30th April 2018 is showing a balance of $79,000.
The following steps will show the process of bank reconciliation of the account of Mr. Miller for the month ending 30 April 2018.
• Step 1 – Compare the Debits and Credits:
The first step in the reconciliation process is to check the debits and credits from the Bank Statement and the Ledger. While comparing both, any inconsistencies such as differences in the dates and amounts or any duplication should be noted. In the case of Mr. Miller, the total debits in his Bank Statement were recorded as $80,675 and the total credits recorded were $82,200. Meanwhile, the total of the debit entries in the books of Mr. Miller was $80,375 and the total of the credit entries in the books of Mr. Miller was $82,869. Hence the debits and credits do not match.
• Step 2 – List the Differences and Mark them as Un-reconciled:
Once the debits and credits are compared, then the differences should be noted and marked as un-reconciled. In this case, for Mr. Miller, the debits are short by $300 as recorded in the Ledger and the credits are short by $669, as recorded in the Bank Statement. Thus, these two items should be marked as un-reconciled.
• Step 3 – Calculate the Bank Charges:
The third step is to calculate the bank charges which are usually present in the Bank Statement. This includes banking fees, interest charges, and service charges. The calculated total amount of these charges should be deducted from the Bank Statement amount. So, in the case of Mr. Miller, there were two bank charges recorded in the Bank Statement, one for service charges amounting to $75 and the other for interest charges of $200. Thus, the total amount of the bank charges calculated is $275 which needs to be deducted from the Bank Statement amount.
• Step 4 – Reconcile the Account Balance: The fourth step is to reconcile the account balance by making the necessary adjustments. This includes adjusting for both the differences as well as the bank charges. In the case of Mr. Miller, the balance in his Bank Statement was $80,675 and the balance in his Ledger was $80,375. The difference between the two amounts is $300 which should be adjusted in his Ledger. Also, the bank charges of $275 should be subtracted from the Bank Statement amount, resulting in an adjusted balance of $80,400 in the Bank Statement. So, the new balance in the books of Mr. Miller is $80,675.
• Step 5 – Check for Un-reconciled Differences
The last step is to check for any un-reconciled differences. In the case of Mr. Miller, the difference in the credits was recorded as $669 which should be adjusted with the Ledger entries. After making the adjustments, the difference between the Bank Statement credit and the Ledger credit amounts to $0, signifying that the account is reconciled.
More bank reconciliation examples on the next page…