Accounting For Tax Deductible Expense On Cash Flow Statement Bank Reconciliations – How To Reconstruct A Bank Statement

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Bank Reconciliations – How To Reconstruct A Bank Statement

A challenging part of accounting can be bank reconciliation. Recon’s are fun for some bookkeepers, while for others it’s a boring bore. Any way you look at it, it’s an accounting job that needs to be done. Late processed checks may bounce if not adequately accounted for in business books. But reckons or “check book balancing” are not as important for any business people.

A bank recon means “marrying” your cash book balance on a bank statement, on a given date.

Bank charges are added to cashbook payments, outstanding checks are deducted and outstanding deposits are added. Standing or debit orders are added to the payment and hopefully the balances will agree. A business should budget for payments from the cash book balance, not the bank statement balance.

A large number of people have some understanding of bank reconciliation. There are instances that the bank may not be able to balance the reconciliation. And this can be attributed more to missing information than to the skill of the person doing the reckoning. In such a situation the bank statement has to be reconstructed.

A bank statement for a particular period may be several pages long depending on the size of the entity concerned. If one leaf is missing, the reconciliation will not remain. Transactions on the missing page affect the result of the bank recon.

What if you know a page is missing and are in no position to contact the bank for a new statement? Banks usually store statements older than 6 months and this can cause delays when copies are requested.

Here are some guidelines for reformatting your bank statements.

* Check the sequence of bank statements.

* If a statement is truly missing, the closing balance on one page will be different from the opening balance on the next statement. count the difference.

* If a difference is established, scrutinize your check book stub to match the amount with the check number identified on the statement.

* For previous months, verify recurring payments, such as standing orders, and see if that amount can be linked to missing information.

* List all payments, check stubs and standing order amounts you have. List all deposits. Add the deposits to the opening balance. Subtract all payments and compare the final balance. Variations may be dishonored checks or bank charges.

* Some bank statements give exact details of how many checks were processed and the total amount on the first page. This simplifies the process.

Bank reconciliation can be challenging, but fun.

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