5 Bank Reconciliation Examples

Example 2: Mrs. Grace Smith runs a bakery which has a bank account in First Bank. As of 29th March 2019, the balance in her books of bank is $10,000. Below is an example of how she is performing the bank reconciliation of her account for that month.

• Step 1: Comparing Debits and Credits

The first step is to compare the debits and credits between the Bank Statement and the Ledger. For Mrs. Smith, the total debits in the Bank Statement amounted to $10,500 while the total credits in the Bank Statement amounted to $9,825. Meanwhile, the total of the debit entries in the books of Mrs. Smith was $10,450 and the total credit entries in the books of Mrs. Smith was $9,735. Thus, the credit entries do not match.

• Step 2: List the Differences and Mark them as Un-reconciled The second step is to list out the differences and mark them as un-reconciled. In this case, for Mrs. Smith, the credits are short by $90 as recorded in the Bank Statement and the debits are short by $50, as recorded in the books of Mrs. Smith. 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, service charges, etc. The calculated total amount of these charges should then be deducted from the Bank Statement amount. In the case of Mrs. Smith, there were two bank charges recorded in the Bank Statement, one for service charges amounting to $50 and one for interest charges of $50. Thus, the total amount of the bank charges calculated is $100 which needs to be deducted from the $10,500 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 Mrs. Smith, the balance in her Bank Statement was $10,500 and the balance in her Ledger was $10,450. The difference between the two amounts is $50 which should be adjusted in her Ledger. Also, the bank charges of $100 should be subtracted from the Bank Statement amount, resulting in an adjusted balance of $10,400 in the Bank Statement. So, the new balance in the books of Mrs. Smith is $10,500.

• Step 5: Check for Un-reconciled Differences

The last step is to check for any un-reconciled differences. In the case of Mrs. Smith, the difference in the credits was recorded as $90 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.

Example 3: A company’s general ledger shows a balance of $35,000 in the bank account at the end of its monthly accounting period.

Bank Statement Balance: $34,000

Bank reconciliation:

Debit Credit

  • Bank statement balance $34,000
  • Add: Outstanding checks 500
  • Deduct: Service charges (150)
  • Adjusted Balance $34,350
  • Less: deposits in transit (2,000)
  • Bank book balance $32,350
  • Add: Interest credited (250)
  • Less: Outstanding Deposits (3,000)
  • Adjusted Balance 29,600

Less: Bank book balance (32,350)

Outstanding Checks $2,750

Net Difference $(2,750)

Example 4: A company’s general ledger shows a balance of $15,000 in the bank account at the end of its monthly accounting period.

Bank Statement Balance: $18,500

Bank reconciliation: Debit Credit

  • Bank Statement Balance $18,500
  • Add: Outstanding checks 1,500
  • Deduct: Service charges (100)
  • Adjusted Balance $20,000
  • Less: deposits in transit (5,000)
  • Bank book balance $15,000
  • Add: Interest credited (250)
  • Less: Outstanding Deposits (2,000)
  • Adjusted Balance 13,250
  • Less: Bank book balance (15,000)
  • Outstanding Checks $(1,750)
  • Net Difference $1,750

Example 5: A company’s general ledger shows a balance of $6,000 in the bank account at the end of its monthly accounting period.

Bank Statement Balance: $6,800

Bank reconciliation:

Debit Credit

  • Bank statement balance $6,800
  • Add: Outstanding checks 300
  • Deduct: Service charges (200) A
  • djusted Balance $6,900
  • Less: deposits in transit (2,000)
  • Bank book balance $4,900
  • Add: Interest credited (50)
  • Less: Outstanding Deposits (1,000)
  • Adjusted Balance 3,950

Less: Bank book balance (4,900)

Bank reconciliation is a very important process for any business to ensure accuracy in its bookkeeping. As evident from the above example, the reconciliation process involves a comparison of the Bank Statement and the Ledger to find any errors or inconsistencies. Furthermore, any differences as well as bank charges should be adjusted and taken into account. Finally, a check should be made to confirm that all the differences have been reconciled.

More bank reconciliation examples are coming soon…

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