Most companies use specially designed accounting software to keep track of cash and credit transactions. This software ensures that the two balance out with as little user input as possible. But no, for example, when Seb reconciles his accounts, what is the first step he should take? Let’s find out in this post.
Companies with multiple business locations sometimes use over a dozen pieces of accounting software connected with one another. Still, sometimes these systems may not keep up with the actual transactions.
So let’s first break down this complex subject into manageable steps:
The numbers don’t lie. Try not to make errors in the cash book statement, which confirm the bank account. Each tick represents a transaction recorded on both books, but some of them are not supported by any evidence at all!
Many transactions, such as cash expenditures, do not occur in a bank account. As a result, your ledger must take notice of this problem. Banks may also impose fees for checking accounts, ATM transactions, and written checks.
Although they are not reimbursable since there are no refunds of expenditure balances paid by another method of financing (checking), they are monies diverted from other purposes and falsified the accounting.
Sometimes banks place transactions in the wrong account. For example, you may have an extra checking account that your bank uses for cash advances.
The trick is keeping track of where those transactions came from so you can log them correctly in your company’s records. If a certain transaction doesn’t appear on the bank statement when it should, there’s a good chance that it will falsify your numbers.
Check The Bank Statement For Errors
As an accountant, be careful when sifting through bank statements. Bank errors are common and could lead to wrong transactions. If an error is found, contact the bank immediately or ask for their help clearing up any confusion.
These changes must be noted in your books as adjustments and financial statements need to reconcile with banks’ records.
One way to make sure that it goes smoothly is by reviewing the bank statement to make a cash book match. When the two are in sync, they should show exactly what has happened throughout a billing cycle.
You will create a bank reconciliation at once as soon as you find one difference on the bank statement and cash book.
If you operate a business, you want to ensure that everything runs smoothly. Experts in the know advise you to reconcile your bank account when receiving a statement from your bank.
Before beginning the reconciliation procedure, ensure that all transactions have been logged all the way to the end of your bank statement.
With most online banking systems, the simplest method to accomplish this is to download your bank statement and add up each transaction one by one. If you try to add them all at once, you may lose track of any errors you make because your eyes become tired.
You should sit down on the last day of the month and get ready to organize your finances. Deposit all of your checks that you got during that month and then go through your bank statements. Compare the list of transactions with what you entered.
For professional accountants, the process may take about 20 – 30 minutes.
While it may seem like a lot of work, the bank reconciliation process is very simple. When Seb reconciles his accounts, what is the first step he should take? All you need are some ingredients: your bank statement, a calculator, and a cash book that’s been properly prepared by you. It’s not that difficult to do.