A bank reconciliation statement is the method used by individuals and entities to check the accuracy of their own transaction register against the records of their bank. The use of your transaction register, or checkbook register, is the primary source for recording the receipt and disbursement of cash through your bank account, while your monthly bank statement represents the corresponding books of the bank. Both sets of books must be reconciled and balanced with each other in order to detect outstanding items.
Timing and Preparation
The bank reconciliation statement should be prepared as soon as you receive your monthly bank statement. The prompt reconciliation of the bank statement to your checkbook will ensure that your records are kept current and that any adjustments are recorded to both set of books. For preparation, you will need to segregate two columns, one for your books (check register) and the other for the bank statement.
Reconcile Bank Statement
To reconcile your bank statement you need to compare your check register with the bank statement. The ending balance shown on the bank statement must be adjusted to the correct total by considering all timing differences and any special items not reflected on the bank statement but shown on the check register. Therefore, all checks and deposits that have been recorded on your check register but do not yet show on the bank statement need to be listed. Checks are deducted from the bank statement and deposits are added. Any errors in amounts must be added or subtracted. The ending balance represents the adjusted balance of your bank statement.
Reconcile Checkbook Register
Your check register must be adjusted by adding or subtracting items shown on your bank statement but not yet reflected on your check book. In this regard, you must add any items received, such as interest, wire transfers, direct deposits and errors to your check register while deducting any service charges, fees, overdrafts and errors booked to your account but not yet entered into your check register. The ending balance represents the adjusted balance of your checkbook register.
Balancing and Booking
The adjusted balance of your bank statement must equal the adjusted balance of your check register. Upon the successful reconciliation of your bank statement, you must rectify your records for any adjustments noted. For example, if a check was returned to you for nonsufficient funds (NSF) you must contact the issuer of the check for compensation. Likewise,you must promptly notify your bank to adjust any errors or omissions that it made to your account regarding deposits or any other issue.
Account holders are responsible for promptly reconciling their records to the monthly bank statements provided to them. In the event that the account holder does not notify the bank of improper use or errors, the bank may not be liable for losses, especially if 90 days have elapsed from the mailing of the last monthly bank statement. This type of agreement is often listed within the account forms signed between the account holder and the bank.