What is Bank Reconciliation
How UK Sole Traders can Reconcile Business Bank Accounts
In order to properly complete a bank reconciliation you will need to begin by comparing the transactions listed in your cash book to the transaction which the bank has listed on your bank statements. Any differences that you notice in either a credit or debit will need to be recorded in a bank statement reconciliation. Whenever your statement becomes available it is a good time to do your reconciliation. You will want to know of any discrepancies as early as possible.
Why is it Important to do a Bank Reconciliation
It would not be advisable to assume everything was going as planned and not looking at your bank statements, while comparing them to your own ledger. Mistakes do occur, even by the bank.You will be able to confirm that all of your bank transactions have been completed and that you have them properly posted to your cash book.
Bank charges, payments and interest can all vary from one month to the next, so the only way of knowing the exact amount you are paying is to look each time.You might also notice that you were the victim of fraud, and early detection will allow you to get on to the bank and take steps to stopping the fraud and potentially gaining back any lost monies.
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Bank reconciliation statement
A bank reconciliation statement is used to see the differences between the bank statement and the cash book. It is likely that many of the differences will be related to timing differences. In order to complete a bank reconciliation you just need to tick all the payments or receipts, i.e. debits and credits, which appear in the cash book or bank statement. Always remember to make notes in the cash book and list any payments that have not been paid. Fill in the totals from both the bank statement and the cash book on the reconciliation statement. The reconciled balance should equal the balance at the bank.
If you do find any mistakes, check everything again thoroughly as you might have made a mistake. If you find that you did not, you should see where the mistake occurs and will be able to follow up on that.
Last modified: 1st March 2018