This blog post introduces four templates you can use to help you analyze your finances and simplify the preparation of bank reconciliation statements. All the templates are available for reconciling business or personal accounts. These templates are useful for professionals like accountants, small business owners, freelancers, and financial managers, as well as individuals who wish to track their personal finances. You will also learn some key terminologies used in bank reconciliation.
What is a Bank Reconciliation Statement?
A bank reconciliation statement is a financial management document used to compare and reconcile the balances in the accounting records and bank accounts. It helps you make sure the balances match and identify discrepancies in your financial records. This is necessary to understand your cash flow and determine the availability of sufficient funds for upcoming transactions. Additionally, bank reconciliation makes sure the balance of the bank statement and the general ledger match by accounting for items such as interest earned or outstanding checks, which may appear in one document but not the other. It is also a great tool for identifying any unauthorized transactions that may be found in your bank statement or account ledger.
Key takeaways for preparing the statement
- The bank reconciliation statement calculates the adjusted cash balance by comparing the ending balance of the bank statement and that of the cash account in your general ledger.
- During reconciliation, add any bank fees and interest earned that might appear in the bank statement but are missing from the account ledger. Similarly, add any outstanding checks and deposits in transit that appear on the general ledger and are not reflected in the bank statement. The goal is to make sure the final balances in these two financial documents match.
- To finalize the reconciliation, adjust the balances to address any identified discrepancies through additions and subtractions.
- The frequency of preparing bank reconciliation statements is typically at your discretion and often may depend on the nature of your business. For example, a business with a high transaction volume requires more frequent reconciliations, such as daily or weekly.
- A bank reconciliation statement helps you identify and prevent accounting errors (such as duplications, additions, or accidental discrepancies), detect fraud, and maintain accurate cash flow records.
Free Bank Reconciliation Templates for Excel
Templates are excellent guides and time-savers when reconciling bank accounts. They highlight which items in the bank and ledger records you need to add or deduct to have accurate documentation. While each template offers unique features, they all follow the standard layout of a bank reconciliation statement. To assist you with this process, we have provided you with four easy-to-follow templates. You can access these templates in various formats, including Excel, Google Sheets, and OpenDocument Spreadsheets.
Bank Reconciliation Form Template 01
Bank Reconciliation Form Template 02
Bank Reconciliation Form Template 03
Bank Reconciliation Form Template 04
Key Terms
Here are different terminologies you should be familiar with when performing bank reconciliation.
- Bank statement – An official document issued by the bank listing all transactions made by an account over a specific period – for example, monthly. It helps track and verify account activity.
- Cash book – An internal and chronological record of all cash receipts and payments in an entity. These include bank deposits and withdrawals.
- Outstanding check – A check issued by an account but not yet processed by the bank. Therefore, the amount is yet to be deducted from the account balance.
- Deposits in transit – Deposits (checks) made to an account and reported in the cash book have yet to be reflected in the bank statement.
- Bank fees – Monies banks deduct from an account for their banking services to customers; typically, not recorded immediately in the cash book. Examples include ATM usage, maintenance fees, transactions charges, and wire transfers costs.
- NSF (Non-Sufficient Funds) checks – Checks that are given back by the bank due to a lack of enough funds in the issuer’s account to cover the intended payment.
How to Use These Templates
As a company or individual looking to keep your finances in order, you need to understand the significance of each template component. Here is a breakdown of how a template fits in the bank reconciliation process.
Fill out the preliminary details
Start by entering essential details like company name, account title, account number, bank name, bank phone, and date. This information is necessary for proper documentation and establishing the sequence of periodic reconciliations.
Find the starting balance and note the current difference
Bank reconciliation begins by noting the starting balance of the bank account and the general ledger. The starting balance is the closing balance for last month. The current difference indicates the difference between the bank balance and the general ledger balance. The goal of the reconciliation is to make the Difference zero.
Compare the bank statement with your ledger
This is the core activity in the bank reconciliation process. It involves the review and analysis of all items in the bank statement and general ledger.
Bank balances – Add deposits in transit and deduct outstanding checks. For each item record the date, description, deposit ID, and amount. Record the difference figure in the ‘Total’ placeholders.
Book balances – To adjust your general ledger, add other income and make deductions not captured in the bank statement. Additions include checks/deposits received by the bank, interest earned, and refunds of previous bank charges. Deductions include bank fees, service charges, and errors on checks. Include a date, description, and amount for each item. Record the difference in the ‘Total’ box.
Identify and Adjust discrepancies
After adjusting the balances, the accounting record’s balance and the bank statement balance should be equal. So, adjust the starting balance figures in both the bank balance and general ledger balances based on the differences in the ‘Total’ placeholders. Then, record adjustments in ‘Adjusted bank Balance’ and ‘Adjusted General Ledger Balance’ cells. Make adjusting for deposits in transit, outstanding checks, income, and deductions until the difference between the bank balance and ledger balance is zero.
Adjusted bank Balance – Adjusted General Ledger Balance = Zero
Update records
Finalize the process by updating your accounting records to reflect your adjustments. Insights from the records can then be used to assess the accuracy of your financial records and overall financial health, detect current and potential sources of discrepancies, and make informed decisions about the company’s financial standing.
In conclusion, a template can reduce your reconciliation process to minutes by helping you plan, reconcile, manage, and report your finances. This is especially if you take advantage of features such as Excel’s automatic summation or Google Sheets’ sharing tool for remote collaboration during the reconciliation process. Feel free to pick a template that best meets your reconciliation needs and preferences.
