Bank reconciliation involves comparing your accounting and financial records with your bank activity to ensure the transactions and balances match. It’s an essential part of audits, tax preparation, and accurate recordkeeping.
Catching discrepancies could mean there’s an error in your recordkeeping that needs to be fixed, or worse, that fraudulent transactions have taken place. In both cases, it’s time to dig into the transaction history to figure out what’s happening.
Regularly performing a bank reconciliation helps you catch and fix any errors before they have a lasting effect. Your financial statements stay accurate and up-to-date so they can be used to inform business decisions.
A bank reconciliation spreadsheet is a type of electronic document, typically created using spreadsheet software like Microsoft Excel or Google Sheets, that helps individuals or businesses reconcile their bank statements with their internal financial records. It provides a structured layout where you can input and compare the transactions recorded in the bank statement with those in your accounting system.
Bank reconciliations are an essential step in the accounting process and it’s something that you’ll be doing on a recurring basis. This means you reap these benefits of using a template every day, week, or month you do bank reconciliation:
Here’s how to do a bank reconciliation in Excel:
Step 1: Download bank reconciliation Excel template.
Step 2: Add business information.
Step 3: Input deposits.
Step 4: Input payments.
Step 5: Check for discrepancies.
You can find more detailed instructions on how to use our bank reconciliation template upon download.
The purpose of a bank reconciliation template is to help individuals or businesses reconcile their bank statements with their internal financial records. The statement outlines the deposits, withdrawals, and other activities affecting a bank account for a specific period.
A bank reconciliation statement is a useful financial internal control tool used to detect and prevent fraud. They also help identify accounting and bank errors by providing explanations of the differences between the accounting record’s cash balances and the bank balance position per the bank statement.
Typical components in a bank reconciliation sheet include:
How often you perform a bank reconciliation depends on the quantity of transactions and complexity of your accounting.
For small businesses processing 20 or less transactions in a month, a monthly bank reconciliation should suffice.
But as you start to increase that transaction amount, bank reconciliations should be a more frequent process.
Remember that the purpose of a bank reconciliation is to capture any mistakes or potential fraud. As your transaction volume increases, it’s more likely these things slip by without being caught.
Finding a discrepancy means it’s time to thoroughly audit your deposits and withdrawals.
Start by looking for a transaction that matches the discrepancy amount. It’s possible one transaction wasn’t recorded leading to the discrepancy, which is a simple fix.
Otherwise, you’ll need to audit both your deposits and withdrawals.
Filter your bank transactions for deposits and compare them to the deposits on your general ledger (GL). A bigger amount on the GL means transactions were recorded in the period that shouldn’t have while a smaller amount means transactions were missed.
Then do the same process for withdrawals.
If you don’t find missing transactions, you’ll need to match GL entries to transactions to make sure a transaction wasn’t entered with an error.