December 30, 2022
Shreeja Ray

Bank Reconciliation Statement

A bank reconciliation statement is what?

A bank reconciliation statement compares an entity's bank account with its financial records by providing a summary of banking and business activity. The statement lists all transactions involving a bank account for a given time period, including deposits, withdrawals, and other activity. An effective financial internal control instrument used to fight fraud is a bank reconciliation statement.

How to get a BRS ready

1. Comparing the opening balances of the bank column of the cash book and the bank statement is the first step since they may differ as a result of uncredited or unpresented checks from a prior period.

2. Compare the debit side of the bank statement with the credit side of the bank column of the cash book, and the credit side of the bank statement with the debit side. Mark each item that appears in both records with a checkmark.

3. Examine the entries in the passbook and the bank column of the cash book to identify those that need to be posted in the bank column of the cash book. Make a list of these entries, and then correct the cash book as appropriate.

4. If any inaccuracies or errors are found in the cash book, correct them.

5. Calculate the bank column's amended and corrected balance in the cash book.

6. Starting with the most recent cash book balance, create the bank reconciliation statement.

7. Add up the unpresented checks and subtract the uncredited ones.

8. Make the required corrections for the bank errors.

Advantages of creating a BRS

1. When checks bounce or businesses begin receiving annoyance calls from creditors or suppliers for payments that have already been released, accounting errors may result in situations that are more than just embarrassing.

2. Bank reconciliations help you identify fraud and lower the likelihood of transactions leading to fines and late fees. A firm can benefit from BRS in a number of ways, including:

3. Error detection: A bank reconciliation assists you in identifying accounting errors that are typical of all businesses. These errors include omissions of payments, multiple payments, and addition and subtraction errors.

4. Monitoring Interest and Fees: Banks may charge your account with interest, fees, or penalties.

5. Fraud detection: You might not be able to stop staff from stealing your money once, but you might be able to stop it in the future. You can identify and spot fraudulent transactions with the aid of bank reconciliation statements. For the purpose of avoiding the accounting employee from faking your records and reconciliations, it is advisable to hire an impartial person to carry out the reconciliations.

6. Receivables Tracking: BRS gives you the ability to confirm all of your receipts, helping you to prevent unpleasant situations and letting you know which entries pertain to receipts that you did not deposit.

Keeping Records for Bank Reconciliation

Statements of bank reconciliation should be kept and stored by time period so they can be easily accessed during the annual audit. For at least the year-end bank reconciliation, the auditors will want to confirm that this statement was properly prepared. Additionally, the auditors may decide to analyze the most recent reconciliation as of that date if they have decided to conduct interim audit processes.

How Frequently Should Your Bank Account Be Reconciled?

Ideally, you ought to reconcile your account each time your bank sends you a statement. Businesses with a high volume of transactions frequently do this at the end of each month, each week, and even each day.

Business should make sure they have logged all transactions up to the end of your bank statement before beginning the reconciliation process. For the regular reconciliation process, businesses that use online banking services can download the bank statements rather than manually entering the data.

What are the Best Tools for Reconciliation?

The market is filled with a wide variety of reconciliation tools. You'll be prepared to consider your options once you're ready to make the most of your team's time and gain from automated solutions.

In summary, the advantages of reconciliation tools include:

1. Standardization:

Regardless of how frequently you decide to perform reconciliations, you'll want the process to proceed consistently each time. This becomes even more challenging when multiple departments and a dispersed team are involved in the transactions (which is inevitable).

2. Audit trails:

Every action taken inside the reconciliation software will be noted and saved for subsequent inspection, if necessary. This promotes adherence to regulations.

3. Increased control:

Because the process occurs within the system, managers and stakeholders can always keep tabs on what is going on at any moment.

4. Accountability:

The software systems are made so that many users in various jobs can each have their own access restrictions. It aids in defining everyone's roles and expectations by offering user controls.


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