Bank reconciliation

Bank reconciliation is the process of matching and comparing figures from accounting records against those presented on a bank statement. Less any items which have no relation to the bank statement, the balance of the accounting ledger should reconcile (match) to the balance of the bank statement.
Bank reconciliation allows companies or individuals to compare their account records to the bank's records of their account balance in order to uncover any possible discrepancies.
When ledgers were written manually, regular checks were important to ensure they remained in balance. It was important to have a reliable source against which to check the accounts ledger.
The statement of account from a bank would have been hand written by a clerk and checked carefully by the bank manager. The statement can be taken as a reliable source, as banks' primary business is to ensure their ledgers correctly tracked the flow of funds. Hence the bank balance at the end of a given period could be obtained from bank and matched to a bank ledger kept by a company's accountant.
What is a Bank Reconciliation?

In any accounting system, a bank reconciliation is made to explain the differences between the $ balance of your bank statement and the $ balance of your own cash book/cheque account. Here the term cash book balance refers to the amount of money your records show as being in your bank or cheque account. If your Bank Reconciliation 'balances', your accounts should be accurate.

When you use MYOB's Reconcile Accounts function, you need to be able to tick off every transaction as it appears on the bank statement. In other words, every transaction on the statement has to be mirrored in MYOB If it is not perfectly mirrored, you cannot reconcile your account.

Transactions that affect the bank account, such as cheques and deposits will automatically find their way into the Reconcile Accounts screen. They wait to be ticked off when you reconcile your cheque account.

Example:

Bank Reconciliation as at 30/6/98






Balance as per Bank Statement





$12,000



less Unpresented Cheques









12568


$6,000






12569


$1,000


$7,000









$5,000



plus Deposits not yet credited on any statements





$3,000



Balance as per Company Cheque Account





$8,000



Here the bank statement shows you have $12,000 in the cheque account, whereas your own figures show you have $8,000. When you entered your Opening Balances for the General Ledger at your Conversion Month, it should have been the Balance as per Company Cheque Account. In the above example $8,000 is the correct Opening Balance.