In our previous blog, we saw what bank reconciliation is all about, its purpose, and the importance of bank reconciliation. Today, let us have a look at how bank reconciliation works.
When reconciling a bank account you will be comparing your internal financial records with the records the bank provides you. Preparing a reconciliation statement every month helps you identify unusual transactions, this can either be a fraud or an accounting error.How does bank reconciliation work?
Start by comparing the record of transactions your business maintains with the balance in your bank statement. Verify each transaction to make sure the amounts match perfectly and make a note of the differences if any. Few businesses prepare a bank reconciliation statement to document that they reconcile their accounts on a timely basis, let it be daily, monthly, or quarterly.How and where to check the transactions?
Your company should be maintaining the data of all the internal transactions either on paper or in software. You can request your bank to provide you online access to your account. This way you can view and download the transactions for a comparison.What happens if the transactions do not match?
Sometimes you might notice minor differences. This could be because of the timing which might include transactions that have not been cleared from the banks’ side.
Say, for example, you issue a check to a vendor and make a note of it in your internal accounting books. The bank will however show a higher balance until the check is processed in the bank.
If you can easily figure out the reason for the discrepancies then you need not worry else there are chances for a bigger issue that has to be addressed.
Thus, a regular review of the accounts can help you identify and solve the issues before they move out of your hands.The best time to reconcile
Accountants say it is better to review your transactions every month. It is advisable for businesses that have a high volume of transactions to reconcile often rather than doing it monthly.
Start checking the transactions on your books with Park Intelli!