Bank Reconciliations

  1. Bank reconciliations are an essential internal control tool and are necessary in preventing and detecting fraud.  They also help identify accounting and bank errors by providing explanations of the differences between the accounting record’s cash balances and the bank balance position per the bank statement.

    The bank reconciliation ensures that all transactions that have gone through the bank statements have been reviewed and checked, thus reducing the probabilities of errors in the data used to prepare accounts.  Bank statements also ensure completeness by helping to ensure that all payments and receipts that have gone through the bank account have also been recorded in the accounting records.  Any differences are identified and explained.  (An example is below.)

    This function requires a segregation of duties, which means that the person who performs the bank reconciliations should not also have access to the recording of transactions in the accounting records or processing of cash disbursements or receipts.  Any differences identified between the accounting records and the bank statements should be adjusted by a person other than the one doing the reconciliations.

    A daily review and posting of bank transactions is done within the accounting department by separate accounting personnel to ensure all wires, ACH deposits and withdrawals, returned checks, and any other electronic items are recorded each day.  A full bank reconciliation of all bank accounts is done on a monthly basis, to be completed no later than the 25th day of the following month, and then approved by the Controller.

    All reconciling differences should be identified and any necessary journal entries to resolve the differences should be posted no later than 90 days after the reconciliation is done.  The bank should be contacted concerning any bank errors which should also be resolved within 90 days.

     

    Adjust cash account in general ledger (Section 1)
    Balance per cash account in general ledger ___
     
    Adjustments to cash account (based on bank statement):
      Add: Bank interest ___
        Credit / wire transfers ___
      Subtract: Bank charges ___
        Standing orders ___
        Direct debits / ACH ___
        Dishonoured checks ___
      Add/Subtract: Errors  
    Adjusted cash account in general ledger X
           
    Adjust balance on bank statement (Section 2)
    Balance per bank statement ___
           
    Adjustments to bank statement balance (based on accounting records):
      Add: Deposits in transit ___
      Subtract: Checks issued, but have not cleared bank ___
      Add/Subtract: Bank errors  
    Adjusted balance per bank statement Y
           
    Compare adjusted balances (Section 3)
    Adjusted cash account in general ledger X
    Adjusted balance per bank statement Y
    Difference Z
           
    Reconciling items  
      Item a – short description ___
      Item b – short description ___
       
    Total reconciling items (= Difference) Z
           

     

     

     

    Prepared by:_______________________________________ Date___________

     

     

     

    Approved by:_______________________________________ Date__________