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August 27, 2008

How does one prepare a company’s first bank statement reconciliation?

To prepare a bank reconciliation for a company that never prepared one previously, I would first make a list of outstanding checks. For example, if your recent bank statement is dated August 31, I would look at the bank statements from June through August and make a list of the check numbers that had been written after June 1, but had not appeared on any of the bank statements from June through August. Next to each check number write the dollar amount of each check. Subtract the total of the outstanding checks as of August 31 from the bank statement balance as of August 31. The resulting amount is the adjusted balance per bank. 

Next, look at the general ledger account that is associated with the bank statement. Let’s assume it is the Cash account. Be certain that the Cash account shows items that appear on the recent bank statements. For example, Have the bank service charges been entered in the Cash account? Have the electronic transfers been entered? If not, you will need to make those entries. You may have to go back to earlier bank statements and enter those amounts as well.

Eventually, you need to get the August 31 balance in the Cash account to be equal to the adjusted balance per bank. If the difference is not a significant amount, you can debit or credit the Cash account for the amount necessary for it to agree to the adjusted balance per bank. I would put the same amount into an income statement account such as Difference per Bank Rec. Keep a copy of your documentation and begin a file entitled Bank Reconciliations.

When the September 30 bank statement arrives, prepare another bank reconciliation. Using a copy of the August 31 listing of outstanding checks, cross off the checks that cleared on the September bank statement. Prepare a September 30 listing of outstanding checks beginning with the checks not crossed off on the August 31 copy, and then add the checks written in September that did not clear on the September bank statement. The total of the outstanding checks as of September 30 should be deducted from the bank statement balance of September 30 to arrive at the adjusted balance per bank as of September 30. Be sure to enter into the Cash account the September bank service charge and other items appearing on the bank statement that have not yet been entered in the Cash account. This adjusted balance in the Cash account as of September 30 should be the same as the adjusted balance per bank as of September 30. If there is a difference, you must identify it and make any necessary adjustments.

Learn more about Bank Reconciliation.

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Comments

19 Responses to “How does one prepare a company’s first bank statement reconciliation?”

  1. Sarah on August 27th, 2008 4:17 pm

    I am taking a online accounting course and I have a few questions that hopefully you would be willing to help me with.

    If I use the accrual basis accounting and I get an insurance policy. Do I report the cost of the insurance policy as an expense when I sign for policy or when I pay for policy? I would think when I sign because I would debit insurance expense and credit insurance payable.

    When expenses exceed revenues in a given period and there are no gains or losses how would this impact stockholders equity. I don’t think it would since we don’t have a net loss or net gain?

    Which account is least likely to be debited when revenue is recorded? accounts payable or accounts receivable

    I would appreciate any help Thanks

  2. Ansar on September 4th, 2008 4:42 pm

    Dear sir,
    I would like to know, that what is the bank reconciliation manual format and what is the depreciation of straight.please send me answer.
    Thanking you,
    Best regards,

  3. tunde on September 5th, 2008 6:34 am

    Sir,
    i want to you to help me to be your member and how would you help me to do this

  4. Alaa Ishak - sharm el sheikh on September 6th, 2008 3:06 am

    Dear Sarah.
    first i hope you get more knoweleadge and information from our lovely site i will try to answer your questions from here and you can ask me any time if you want on my e-mail i’m working in sonesta sharm el sheikh and my position is financail controller my e-mail is alaaishak@sonestasharm.com
    1- you have to start make the monthly accrual for the insurance polices whenever you thinking to sign the polices itself not when u pay it according to the charges perencable
    2-when the revenue achived and recored the other side is must be one of the following:
    - account receivable
    - cash cash sales or save or bank
    - guest ledger

    3- for shareholders profit or loss distrubutions i think all the companies make this kind of distrbutions over 4 times each 3 months so if any month have loss or no gains it will be mixed inside the other months which have profit or gains

    thank you sarah and good luck

    alaa ishak
    sonesta sharm el sheikh
    egypt
    +0127374101
    alaaishak@sonestasharm.com

  5. Mumtaz Ahmad Malik on September 6th, 2008 11:41 pm

    Dear Sir,
    I am in very touch and got so many knowledge from from this valuable site
    Today my question is that if we have sale some of goods and in the books of accouns
    the remaining finished goods what entry will
    be passed for example we have prepared 12 Centrifugal Machines at our Engineering Division out of it 10 we have book for sale and remaining 2 are lying in our stock.What accounting entries will be passed for all the sales and what type of cost of goods sold will be assumed for example if we have to pay our Contractros bill lateron

    I PRAY FOR YOUR GOOD HEALTH AND LIKE to know all these entries

    Mumtaz Ahmad Malik
    Asstt.Manager Accounts
    Engg.Div.
    00923346535847
    PAKISTAN

  6. Mamun on September 18th, 2008 11:58 am

    Sir,
    I want to know, why a company prepare “Bnak Reconciliation Statement”?

    Thanking you.

    Mamun ur Rashid
    Student of BBA
    ASA University Bangladesh
    mun_rashid&yahoo.com
    +8801719161519
    Dhaka,Bangladesh.

  7. Akkash on September 24th, 2008 2:19 am

    Aslam-0-Alikum Sir

    How are you? i hope your are well and good.

    Sir, can you help me in the preparation of Bank reconciliation Statement?

    Thanks and Regards
    Akkash

    Pakistan

  8. malathy on October 1st, 2008 10:59 am

    hi sir,
    this site is very useful and knowledgable.i feel that the explanation given for each concept is very good but if the concepts are explained through workedout problems it will me more helpful in understanding.for eg the bank reconcilment statement etc.

    thank u.

  9. m.izhar khan on November 5th, 2008 2:33 am

    hy this site is very worthable ,i am also teacher and teach accounting but i am realy thanks full to this site it helps me a lot and clear my concept more , i advice u dont stop this site bcoze most of people are getting information and update ,

    thanks

  10. ana on November 27th, 2008 5:24 am

    how to prepare an adjusted cash book

  11. dela on January 30th, 2009 9:16 am

    hi sir

    i have written accounts like 4 times and failed them all.why is it so hard to remember the formats and the debit and credit. or is the problem with me

  12. mirza on May 31st, 2009 5:53 am

    Dear Sir,

    Please I want to know the list of bank/service charges in united states duly allowed by the banking authorities.

    zameer baig (Mr)

  13. Shadab Danish on June 16th, 2009 3:49 am

    Dear sir,

    I want to asked question which is related to Sarah.
    Insurance premium when we paid last month of the year we pass the entry in our transction book
    Insurance A/c————-Dr
    To Insurance Payable A/c
    Nex entry is on after this entry is
    Insurance payble A/c————–Dr
    To Bank
    it is right or wrong please advice me
    Shadab Danish INDIA

  14. Nakita on July 17th, 2009 5:19 am

    Using the accruals basis the transaction must be recorded when the invoice has been received. Typically insurance policies extend over a period of time. So if you are preparing accounting statements that bridge different accounting periods then the expense needs to be spread over the period of insurance cover.

    Nakita McCarthy
    Accounting and Tax Service
    http://www.aats.ie

  15. Maxwell on July 22nd, 2009 5:28 am

    Dear Sir,

    Please i want you to teach me how to prepare a bank reconciliation statement and how to work on depreciation a/c.
    Please i beg of you to teach me all i need to know about accounting for i am a student of accounting in Federal College of Education Obudu. Cross River State, Nigeria.
    Thanks for your co-operation.
    Bye.
    Maxwell Godwin Ekwo.

  16. AKINDELE on September 2nd, 2009 2:37 am

    sir,

    I want to know how to prepare a bank reconciliation statement when then there is no cash book but u have bank statement,details of what was paid to the bank & withdrawal from the bank.

    Thank you

  17. Akinwale on September 14th, 2009 4:49 am

    sir,i work as an accountant in a company,thou i study accounting but av not practise.i have a tellar of money deposited in a bank but i did not av a record of money withdrwa.how can i prepare bank reconciliation in ds situation? No this my 1st term to mail you

  18. deepthy on October 25th, 2009 8:26 am

    R/s
    I Need to know how a Bank reconciliation statement is prepared? Give a Proforma eg: of the same with figures.

  19. ACoach on October 25th, 2009 11:03 am

    See the Explanation of Bank Reconciliation on AccountingCoach.com for a detailed illustration.

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