Pre-reading caution :
This is not telling you how to do a bank reconciliation, but this will tell you HOW TO DO A BANK RECONCILIATION IN EFFECTIVE WAY. If reconciling checking account is always time consuming for you, this tips may helpful.
Purpose of bank reconciliation is to ensure company’s checking record is consistently reflected on the bank statement, and vice versa.
Question :
Has it finished when my Checking Account Ledger has match to the bank statement ?
Answer :
NOT YET
Next Question :
Why ? what else ?.. Oh no.. I have hundred of transaction that haven’t been posted yet
Bank reconciliation always time consuming. Because you spend most of your time in balancing work so you miss opportunity to do advance review and cross checking.
Company issues hundred of checks and wires fund to vendors, also receiving many checks and incoming wire from customers. Some checks shown on the current bank statement but they are not shown on current check register. Check issued on the check stub are not exist on the bank statement. Some strange incoming funds shown but it’s not shown on checking ledger, some small amount are shown on bank statement, but they are not shown on the checking register, some of them are shown on the credit side the rest are shown on the debit side.
WOW !... SO MANY ! SO MASSY ! CONFUSING !
Where should I start it from ?.
Start it from the most obvious part .
Get know and used with the common charges or rewards by the bank. These are some charges and income that directly deducted from your bank balance or added to your bank balance by the bank without prior notice
Adjust them all by General Journal ! :
Monthly Bank Fee [ Debit : Bank Charge - Credit : Checking Account ]
Bank Stamp [ Debit : Bank Charge – Credit : Checking Account ]
Interest Income [ Debit : Checking Account – Credit : Interest Income ]
Tax On Interest [ Debit : Tax on Interest – Credit : Checking Account ]
Make sure you catch and adjust all those “small bugs” already.
Update your General Journal
Yet, some AUTO-DEBIT PAYMENT that you set before and run by the bank automatically on common due date ( i.e.: Telephone bills due on every 7th , Electricity due on every 15th, Water bills due on every 20th, Health Insurance due on every 25th, Property insurance due on every 30th, etc ) you should have the schedule on hand already.
Post them all by manual check entry ! :
Telephone bills [ Debit : Telephone Expense – Credit : Checking Account ]
Electricity & Water [ Debit : Utilities Expense – Credit : Checking Account ]
Health Insurance [ Debit : Employee’s Benefit – Credit : Checking Account ]
Property Insurance [ Debit : Deferred Insurance – Credit : Checking Account ]
Etc…. (make sure all those auto-debit payment posted already)
Update your Manual Check Register
Now…. Ending Balance on your current Checking Ledger should change already...
Compare it with Ending Balance on Bank Statement………
HEY ! IT HAS NOT BALANCE YET !
What is next ?
Next…..
Get the check stub on your hand…..
Look at the Bank Statement……and go to the very beginning of month…
Did you find some check number shown but they are not on the check stub ?. And some incoming deposit but not shown on your current ledger ?
YES !, I FOUND THEM
But…., where are they coming from ?
Great..!
Open your previous month checking register…….. and go to very beginning of month… Yea… you should find them in there.
Look, they are marked as UN-CLEARED CHECKS and DEPOSIT IN TRANSIT.
[Leave it, and nothing you should do ! ].
They are just fine……
Okay.. before the next shout…. :-p
On your check stub…
Go to the end of month date ( the 25th – 31st )…
You should find some issued checks but they are not persist on the Bank Statement.
I assume you've figured them out already.
[ Mark them all with “UN-CLEARED CHECKS” ]
Hey… also you should find some deposits but they are not shown up on the Bank statement.
[ Mark them all with “DEPOSIT IN TRANSIT” ]
Now……… check this out ….
[Ending Balance in Your Ledger] (–) [DEPOSIT IN TRANSIT] (+) [UN-CLEARED CHECKS]
Compare to :
[ENDING BALANCE on the Bank Statement]
Have they been matched already ?.
YES ! YES, THEY’VE BEEN MATCHED ALREADY !
Has it been done already ?
Yea… but how long did it take ?. 30 minutes ? or 1.5 hours or 3 hours ?.
Take a note !
On the next bank recon, measure it by a stop watch…..
You should do this part faster and faster……
Now…set your next goal……
[NEXT GOAL]
Do it in 30 minutes
Use the rest 30 minutes to review some deposit and payment…. The amount, the journal entry, the due date, both quantity and quality aspect !
You may find some issue on it, bring the issue to a meeting with your Financial controller.
[NEXT GOAL]
Get your salary increased or a promotion !
Sure you will get it !
--------- Cheers ------
Purpose of bank reconciliation is to ensure company’s checking record is consistently reflected on the bank statement, and vice versa.
Question :
Has it finished when my Checking Account Ledger has match to the bank statement ?
Answer :
NOT YET
Next Question :
Why ? what else ?.. Oh no.. I have hundred of transaction that haven’t been posted yet
Bank reconciliation always time consuming. Because you spend most of your time in balancing work so you miss opportunity to do advance review and cross checking.
Company issues hundred of checks and wires fund to vendors, also receiving many checks and incoming wire from customers. Some checks shown on the current bank statement but they are not shown on current check register. Check issued on the check stub are not exist on the bank statement. Some strange incoming funds shown but it’s not shown on checking ledger, some small amount are shown on bank statement, but they are not shown on the checking register, some of them are shown on the credit side the rest are shown on the debit side.
WOW !... SO MANY ! SO MASSY ! CONFUSING !
Where should I start it from ?.
Start it from the most obvious part .
Get know and used with the common charges or rewards by the bank. These are some charges and income that directly deducted from your bank balance or added to your bank balance by the bank without prior notice
Adjust them all by General Journal ! :
Monthly Bank Fee [ Debit : Bank Charge - Credit : Checking Account ]
Bank Stamp [ Debit : Bank Charge – Credit : Checking Account ]
Interest Income [ Debit : Checking Account – Credit : Interest Income ]
Tax On Interest [ Debit : Tax on Interest – Credit : Checking Account ]
Make sure you catch and adjust all those “small bugs” already.
Update your General Journal
Yet, some AUTO-DEBIT PAYMENT that you set before and run by the bank automatically on common due date ( i.e.: Telephone bills due on every 7th , Electricity due on every 15th, Water bills due on every 20th, Health Insurance due on every 25th, Property insurance due on every 30th, etc ) you should have the schedule on hand already.
Post them all by manual check entry ! :
Telephone bills [ Debit : Telephone Expense – Credit : Checking Account ]
Electricity & Water [ Debit : Utilities Expense – Credit : Checking Account ]
Health Insurance [ Debit : Employee’s Benefit – Credit : Checking Account ]
Property Insurance [ Debit : Deferred Insurance – Credit : Checking Account ]
Etc…. (make sure all those auto-debit payment posted already)
Update your Manual Check Register
Now…. Ending Balance on your current Checking Ledger should change already...
Compare it with Ending Balance on Bank Statement………
HEY ! IT HAS NOT BALANCE YET !
What is next ?
Next…..
Get the check stub on your hand…..
Look at the Bank Statement……and go to the very beginning of month…
Did you find some check number shown but they are not on the check stub ?. And some incoming deposit but not shown on your current ledger ?
YES !, I FOUND THEM
But…., where are they coming from ?
Great..!
Open your previous month checking register…….. and go to very beginning of month… Yea… you should find them in there.
Look, they are marked as UN-CLEARED CHECKS and DEPOSIT IN TRANSIT.
[Leave it, and nothing you should do ! ].
They are just fine……
Okay.. before the next shout…. :-p
On your check stub…
Go to the end of month date ( the 25th – 31st )…
You should find some issued checks but they are not persist on the Bank Statement.
I assume you've figured them out already.
[ Mark them all with “UN-CLEARED CHECKS” ]
Hey… also you should find some deposits but they are not shown up on the Bank statement.
[ Mark them all with “DEPOSIT IN TRANSIT” ]
Now……… check this out ….
[Ending Balance in Your Ledger] (–) [DEPOSIT IN TRANSIT] (+) [UN-CLEARED CHECKS]
Compare to :
[ENDING BALANCE on the Bank Statement]
Have they been matched already ?.
YES ! YES, THEY’VE BEEN MATCHED ALREADY !
Has it been done already ?
Yea… but how long did it take ?. 30 minutes ? or 1.5 hours or 3 hours ?.
Take a note !
On the next bank recon, measure it by a stop watch…..
You should do this part faster and faster……
Now…set your next goal……
[NEXT GOAL]
Do it in 30 minutes
Use the rest 30 minutes to review some deposit and payment…. The amount, the journal entry, the due date, both quantity and quality aspect !
You may find some issue on it, bring the issue to a meeting with your Financial controller.
[NEXT GOAL]
Get your salary increased or a promotion !
Sure you will get it !
--------- Cheers ------
