How to create a bank reconciliation statement

Knowing how to make a bank reconciliation statement is very useful when the company's cash on hand and the bank's cash on hand do not match. This can happen for a variety of reasons such as pending checks, deposits on transits, and various other errors. As a result, organizations tend to draw up bank reconciliation statements to spot the differences in accounting records.


How to create a bank reconciliation statement - example

The following example illustrates how the bank account and company records are adjusted using the bank reconciliation statement. This is done using the information given below.

Company XYZ's statement on December 31, 2013 shows a balance of $ 24,594.72 and the company's cash account shows a balance of $ 23,196.79. The following additional information is also available:

  • The following checks are outstanding issued by the company to its customers.

Bank transfer statement 01

  • An amount of $ 400.00 deposited on December 31st will not appear on the bank statement.
  • The bank returned an NSF check for $ 850 with the statement.
  • The bank charges are $ 50.
  • The company has earned $ 1,237.22 in interest income which was only posted to the bank account.
  • The bank has collected a bill of exchange receivable for $ 550 on behalf of the company, which includes interest income of $ 50. The bank charged a $ 10 collection fee.
  • A deposit of $ 430 was incorrectly entered as $ 340 on the company's financial records.

Bank reconciliation statement

How to create a bank reconciliation statementBank transfer statement 03

Importance of bank reconciliation

  • When preparing the bank reconciliation, it helps to identify errors in the accounting records of the bank or company.
  • In addition, it can be used as a control mechanism for cash transactions including deposits and withdrawals.
  • It is useful to make comparisons between the records kept by the company and the bank account information.
  • If the statements are created on a monthly basis, this is useful for regular monitoring of the company's cash flows.

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