What is bank reconciliation
Bank reconciliation is the process of reviewing transactions on a bank account and checking that each movement is recorded in the accounting system, so that the accounting matches the bank statement.
So what do you do when the balance on the bank statement does not match the one in the accounting? Most likely, you have forgotten something or recorded something incorrectly. It is usually easy to correct, but it may take some time to find. Here you need to use the elimination method.
How to find common errors in a bank reconciliation
Remember that the bank statement is the final answer, and the accounting must match it.
Here is what you should check, in this order:
Check bank and card fees
These are usually small amounts, but for the accounting to be completely correct, you must also record these.
Check if you find a matching amount
Go through the bank statement to see if you find an amount that matches the discrepancy 100 per cent. If so, you have simply forgotten to record a single voucher.
Check for vouchers that do not exist in reality
This may sound strange, but it is easy to record something twice or record something in the wrong month.
Check the accounting often enough
It varies from company to company how often you should check the accounting. For small sole proprietorships, it may be enough to do it once a year, while large companies should do it at least monthly.