The bank statement.

All staff involved in bookkeeping with more than accounts receivable or accounts payable know the importance of regular and frequent reconciliation of the bank statement with the bank account as reported in the accounting system.

The reconciliation of the monthly bank statement with the bank account balance reported in the accounting system is a high priority in the month end closing process.

When the bank statement and the balance reported in the bank register agree there is often a sense that a major component of the month end accounting close is done!

In many companies there can be numerous bank accounts and credit card accounts  that need reconciliation. The pressure is on!

However beware!

A bank reconciliation is not complete until all the uncleared reconciling payments and deposits have been examined in detail with the thought that such items, unless they have a date close to the bank statement date, may well need an adjusting or correcting entry.

Bank Reconciliation Problems

There are several problems that continually arise as part of the bank reconciliation, and which you should be aware of.

They are: 

Uncleared checks that continue to not be presented. There will be a number of checks that either are not presented to the bank for payment for a long time, or which are never presented for payment. In the short term, you should treat them in the same manner as any other uncleared checks – just keep them in the uncleared checks listing in your accounting software, so they will be an ongoing reconciling item. In the long term, you should contact the payee to see if they ever received the check. You will likely need to void the old check and issue them a new one.

Checks clear the bank after having been voided. As already noted , if a check remains uncleared for a long time, you will probably void the old check and issue a replacement check. But what if the payee then cashes the original check? If you voided it with the bank, the bank should reject the check when it is presented. If you did not void it with the bank, then you must record the check with a credit to the cash account and a debit to indicate the reason for the payment (such as an expense account, or an increase in a cash account or decrease in a liability account). If the payee has not yet cashed the replacement check, you should void it with the bank at once to avoid a double payment. Otherwise, you will need to pursue repayment of the second check with the payee. 

Deposited checks are returned. There are cases where the bank will refuse to deposit a check, usually because it is drawn on a bank account located in another country. In this case, you must reverse the original entry related to that deposit, which will be a credit to the cash account to reduce the cash balance, with a corresponding debit (increase) in the accounts receivable account.

Payments and deposits recorded in error. There are situations when simple errors including duplicated payments and deposits get posted to the bank account in the accounting system. These errors are found amongst the list of un-cleared items described above. It is important that each of these postings be investigated and documented as to the correct procedure to correct the entry and update office any bookkeeping processes to avoid the same errors in the future.

If you need more help with any bookkeeping matters please contact John Mottram at 214-390-7446 or go to our website at www.stensonfs.com. Stenson Bookkeeping Simplified specializes in all bookkeeping, payroll, receivables, payables, cash management and project receipts and expenses reporting faced by real estate, construction trade an e-commerce businesses on a day to day basis.