🟠 Advanced 20 minadvanced path
Bank Reconciliation Step-by-Step
Reconciling means proving that the balance on your bank statement matches the balance in your books, after accounting for timing differences.
Learning objectives
- Compare bank statement to book balance.
- Identify outstanding checks and deposits in transit.
- Record fees, interest, and errors.
Step-by-step
1. Start with the bank ending balance
Take the ending balance from the statement.
2. Add deposits in transit
Cash you recorded but the bank hasn't posted yet.
3. Subtract outstanding checks
Checks you wrote that haven't cleared.
4. Adjust books for fees, interest, and errors
Book side gets fee expense, interest income, and correction entries.
5. Balances should now match
If not, hunt down the difference before closing the period.
Key takeaways
- Compare bank statement to book balance.
- Identify outstanding checks and deposits in transit.
- Record fees, interest, and errors.
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