Such a fee is typically deducted automatically from your account. Therefore, while preparing a bank reconciliation statement you must account for any fees deducted by the bank from your account. This is done by taking into account all the transactions that have occurred until the date preceding the day on which the bank reconciliation statement is prepared. At times, the balance as per the cash book and passbook may differ due to an error committed by either bank or an error in the cash book of your company. Whereas, credit balance as the cash book indicates bank overdraft or the excess amount withdrawn from your bank account over the amount deposited.

On the other hand, deposits in transit are the opposite of outstanding checks. Deposit in transit refers to any checks that the company has received from another party, mostly customers. Deposits in transit are also checks that the company has presented to the bank, but the check did not clear before the preparation of the bank statement.

For example, you are handling a large scale business with transactions over 50 in a week. It is helpful for a company to have a separate general ledger Cash account for each of its checking accounts. For instance, a company will have one Cash account for its main checking account, a second Cash account for its payroll checking account, and so on.

For simplicity, our examples and discussion assume that the company has only one checking account with one general ledger account entitled Cash. There’s nothing harmful about outstanding checks/withdrawals or outstanding deposits/receipts, so long as you keep track of them. Bank reconciliations are like a fail-safe for making sure your accounts receivable never get out of control. And if you’re consistently seeing a discrepancy in accounts receivable between your balance sheet and your bank, you know you have a deeper issue to fix. Cash management software allows businesses to gather real-time cash positions across the organization, helping to make better business decisions based on accurate data. Reconciliation reports provide a summary of the reconciliation process and help to identify any errors or discrepancies.

When can we request a Reconciliation?

There are two main things that companies look for in a bank reconciliation. These are categories of discrepancies that cause a difference in the balances between the balances in the bank book and bank statement. Bank reconciliation accounting is performed by the accounts payable department.

1. The longer you go without doing it, the longer it will take to catch up.
2. Prior to reconciliation, a company should make sure all transactions have been recorded up to the end of the bank statement.
3. Ideally, you should reconcile your bank account each time you receive a statement from your bank.
4. The very purpose of reconciling the bank statement with your business’ books of accounts is to identify any differences between the balance of the two accounts.

Therefore, such adjustment procedures help in determining the balance as per the bank that goes into the balance sheet. Mary Girsch-Bock is the expert on accounting software and payroll software for The Ascent. The goal is to get your ending bank balance and ending G/L balance to match.

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This includes things like bank fees, which you might not have accounted for yet. This might be in a logbook, on a spreadsheet, or in an accounting software package. Some accounting software will pull in bills and receipts with the help of data capture tools and extract the data automatically.