How to Prepare a Detailed Bank Reconciliation
- 1). Begin with a printout of the general ledger for the account you will be reconciling for the correct time period. Verify that all known transactions have been entered into the ledger for the period under review.
- 2). Prepare two reconciliation sheets. At the top of the first sheet, list the ending balance as reported on the bank statement. At the top of the second sheet, list the ending cash balance as it appears on the ledger.
- 3). Compare each deposit item (those that increase the balance of the account) listed on the bank statement with the ledger. If an item appears on the ledger, but not on the bank statement, it may have been deposited at a time later than the bank's cutoff for daily processing. List the item as a "deposit in transit" on the reconciliation that begins with the bank statement balance. If interest has been earned that has not been recorded on the ledger, list the item as "interest earned" on the reconciliation that begins with the ledger balance. Tick off items as you account for them in both places. Verify that all deposit items have been accounted for on both the bank statement and the ledger.
- 4). Compare each payment item (those that decrease the balance of the account) listed on the bank statement with the ledger. Normally checks will be written and listed on the ledger that have not yet been presented to the bank for payment. List these outstanding checks on the reconciliation that begins with the bank statement balance. Include the check number and amount on the listing. Record any payment items listed on the bank statement but not on the ledger on the reconciliation that begins with the ledger balance; examples of these items might be bank fees or an electronic payment that someone failed to enter in the ledger. Tick off items as you account for them in both places. Verify that all payment items have been accounted for on both the bank statement and the ledger.
- 5). Total each reconciliation sheet to arrive at a corrected cash balance. The bank statement balance plus deposits in transit less uncleared checks must equal the ledger balance plus interest earned less any unrecorded payments. If it does not equal, check the math and then go back and double check that all transactions have been ticked off.
- 6). Make an entry in the general ledger or appropriate subsidiary journal for any items listed on the reconciliation sheet below the ledger balance; these items have already been processed by the bank and must be added to the ledger.
Source...