A challenging part of accounting can be bank reconciliation. For some bookkeepers, awards are fun, for others, it’s nothing more than 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 on the company’s books. But recons, or “check balancing,” is just as important to business people.
Bank recognition is simply the “marrying” of a balance on a bank statement, on a given 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 payments and hopefully 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 times when bank reconciliations may not add up. And this could be attributed more to missing information than to the skills of the person doing the reconnaissance. In such cases, the bank statements have to be reconstructed.
A bank statement for a particular period could be several pages long, depending on the size of the entity in question. If a page is missing, the reconciliation will not balance. The transactions on the missing page obviously impact the bank recognition result.
What if you know a page is missing and you can’t contact the bank for new statements? Banks typically file statements that are more than 6 months old, which could cause delays when copies are requested.
Here are 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, examine your checkbook stubs to link that amount to an unidentified check number on the statement.
* Verify recurring payments, such as standing orders, from previous months, and check 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 opening balance. Deduct all payments and compare with the ending 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.
