HOW TO PREPARE FIRST BANK RECONCILIATION

To prepare a bank reconciliation for a company that never prepared one previously, you need to first make a list of outstanding checks. For example, if the company's recent bank statement is dated August 31, you should 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 Taka 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 account ledger 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 into 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. Put the same amount into an income statement account such as the difference per bank reconciliation. 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 has not yet been entered into 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.