Bank Reconciliation

Bank Reconciliations are extremely important as preparing the payroll, creating invoices.


I have dedicated my second blog to bank reconciliation (bank Rec) since this is very crucial in catching any mistakes, double entry, over or under statements. Nowadays with the advancement of accounting software, the bank reconciliation are easy to do. The trick is to perform this on a monthly basis. I have looked at clients books with the negative few hundred thousands of dollars. Off course if that was accurate the client would have been in serious cash flow issue. Fortunately for them the bank rec was never done. What did it all mean? the financial statements were not accurate and reliable. It took me a while to go through the bank statement month by month and sort out the actual transactions to reflect the actual cash in flow and out flow.

The Process

The process is very simple, take the bank statement for month, one can look it up online as well. Mind you start from last month that the books were reconciled. Consequently, each line number on the bank are checked against what we have in the books/accounting software. Ideally, you would want to do this for debit accounts and then credit accounts (don’t fall asleep yet) while you are doing this you tick your accounts on the books and leave a tick mark on your bank statements.

If there are some items on the bank statements that are not reflected on the bank but not in the software you would want to record them and date them for the actual day that they appeared. Examples would be bank charges, interests, rent expense. Once you have taken care of these items you would want to see the balance per bank is identical to balance per books. This means you have reconciled. Isn’t this exciting? probably not, unless you have being doing this for hours since you couldn’t reconcile. Trust me I have been there.


So whatever you have left is outstanding items, we have recorded them in the books however they haven’t being cashed. what does this mean? You had written a cheque let’s say to your supplier for Oct 28 and your supplier hasn’t put the cheque in his bank account. It is outstanding some accountants like to write O/S next to the accounts. So what it means is that even though the bank accounts says we have 10,000 in the account. Once the cheques cash we will have less, genius!! So this process ensures the little things are taken care of, likewise, you may have recorded rent or cheque number XX 5 times, so the bank per books may show less money. The unreconciled amounts are worth investigating and mistakes there will be fixed.

Oh yeah! this bring me to a joke! 🙂  here it goes:

What happens if a doctor makes a mistake, well the patient may die

An engineer makes a mistake? well the building or bridge may collapse.

What happens if an accountant makes a mistake, nothing! we can adjust, revers, or delete them 🙂 very true! well mind you need to catch the misstate on time.

Need a bank rec done? setup an appointment with us and ask for a complimentary bank rec.

For any accounting, bookkeeping or taxation in Ottawa or from anywhere else please contact us.

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