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Bank Reconciliation Calculator

Created by Adena Benn
Reviewed by Tibor Pál, PhD candidate and Steven Wooding
Based on research by
Robinson S, Wood F Principles of Accounts for the Caribbean: 6th Edition Hodder Education; February 25, 2018
Last updated: Jan 18, 2024


Our bank reconciliation calculator was designed to help you to reconcile your bank statement with your company's accounts. If you are studying accounting or are new to business and need information on bank reconciliation, our bank reconciliation calculator is just the tool you need.

All businesses need to keep track of financial information and reconcile the company's accounts to their bank statement once per month or as often as they receive a bank statement to ensure neither the company's accountant nor the bank has made any mistakes. It also helps to keep track of discrepancies between the outstanding transactions and what is recorded in the company's bank account.

In this article, we will explore the following:

  • What a bank reconciliation statement is;
  • Why businesses create bank reconciliation statements;
  • An example of a bank reconciliation statement and how to prepare it; and
  • Four reasons why you should prepare your bank reconciliation statement on a monthly basis.

💡 If you are an accounting student, we have several business accounting calculators that may interest you. Be sure to visit our business budget calculator and the cost of doing business calculator.

What is a bank reconciliation statement?

A bank reconciliation statement reconciles the bank statement with the company's accounts. It is an accounting document that helps validate the payments that have been processed, check that all deposits recorded in the company's books have actually been made, and identify outstanding transactions in a given period (namely a month).

Why is it important for companies to prepare bank reconciliation statements monthly?

If the entries in your company's accounts record and bank statement are the same, then you would find no reason to prepare a bank reconciliation statement. However, this is rarely so. More often than not, a company's bank statement contains entries that are not in its cash book. Additionally, there will be entries in the cash book that are not in the company's bank account.

It is imperative that companies prepare bank reconciliation statements at least once per month for the following reasons:

  • To catch fraudulent transactions. Because bank reconciliation statements help us to catch all discrepancies between the company's accounts and bank balance, making this statement monthly helps companies spot issues early, making it possible to minimize losses.

  • In order to know how much of the money shown in your bank statement is available to be spent. Let's say your company, Somo, has 200,000 in its accounts at the beginning of February. It paid three suppliers by cheque: companies A, B, and C, 20,000, 14,000, and 4,234, respectively. Company A and C cashed their cheques, and your company's account was debited 24,234. When you look at your company's bank account, it would be easy to believe that you actually have $175,766 on hand. This is not entirely correct because 14,000 of the money in the account rightfully belongs to company B. When the bank reconciliation statement is prepared, adjustments are made to the business's account for all outstanding transactions.

  • To avoid losses since doing bank reconciliation monthly allows a company to remain abreast of all charges against its accounts so as to cancel all unnecessary payments. For instance, let's say your company has been using a particular accounting software for the last three years, for which it pays a monthly subscription fee. You decided to invest in new software but forgot to cancel the subscription for the old one. By preparing your company's bank reconciliation statement monthly, you are more likely to notice the issue, cancel the subscription early, and save money in the process.

  • To identify missed and duplicate payments: Everyone makes mistakes, whether accountants or bank tellers. So as a business owner, it is your duty to ensure your bank reconciliation statement is prepared often to spot such issues.

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How to prepare your bank reconciliation statement

Complete the following steps to prepare your bank reconciliation statement:

  1. Compare the information appearing in your cash book with those on your bank statement.

  2. Underline the figures that are reflected in both documents.

  3. Create an adjusted statement to show the figures that have been processed by the business but are not yet reflected in the bank statement:

    • Add the deposits that are in transit;

    • Deduct the amounts for outstanding cheques; and

    • Make adjustments (add or subtract) to reflect bank errors.

  4. Adjust the amount in the cash book:

    • There are some fees that are charged by the bank that would not be accounted for in the cash book until the bank reconciliation is done. Some of these fees are transaction processing fees, overdraft fees, etc. These fees must be entered into the cash book, and the final amount must be adjusted to reflect them.
  1. Compare the balances to ensure they are equal. If they are not equal, you need to review the accounts again to spot the error and complete the adjustments.

  2. Prepare journal entries to reflect the changes.

Examples of the cash book, bank statement and bank reconciliation statement

We use two documents to prepare our bank reconciliation statement. Our cash book and bank statement.

The following tables show examples of a cashbook, bank statement, and bank reconciliation statement for company Somo for January 2023.

Company: Somo

Cashbook (Single column)

For January 2023

Dr (Cash Received)

Cr (Payments)

2023

Description

$

2023

Description

$

Jan

1

Balance b/f

10,038

Jan

3

I. Ahmad

760

January

5

Commission

1234

January

8

Stationary

100

January

10

A. Singh

450

January

15

Omni Calculator

876

January

12

M. Allen

435

January

20

Electrical charges

100

January

31

Balance c/d

10,321

12,157

12,157

Company: Somo

Bank Statement

Withdrawal

Deposit

Balance

2023

$

$

$

January

1

balance b/f

10,038

January

3

10345*

760

9,278

January

3

With. fee*

7

9,271

January

6

Deposit

1,234

10,505

Company: Somo

Bank Reconciliation Statement

Bank balance

10,505

Add

Deposit in Transit

450

435

Deduct

Outstanding cheques

100

876

100

10,314

Cash book balance

10,321

Deduct

Withdrawal fee

7

10314

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How our bank reconciliation calculator works

To use our bank reconciliation calculator, simply do the following:

  • Find the values that are in both your cash book and bank statement. Underline them.

  • Take the remaining values in your bank statement and enter them in the section of our bank reconciliation calculator labeled adjustments to cashbook.

  • Likewise, take the values in your cashbook, but not your bank statement, and enter them in our calculator in the section headed adjustments to bank statement.

  • When you are sure you have entered all of the values, check the section of our calculator marked unreconciled difference. If it is zero, you have completed your bank reconciliation.

  • If the unreconciled difference is not equal to 0, double-check your records. You have missed something.

FAQ

Can balance brought forward be negative?

The balance brought forward can indeed be negative. The balance brought forward is negative when a company's expenses exceed its capital. This may indicate a company is in trouble.

How do I prepare a bank reconciliation statement?

To prepare your bank reconciliation statement, follow these steps:

  1. Get your cash book and bank statement for the given month.

  2. Underline all of the items that appear in both documents.

  3. Using the balance shown in your cashbook, add all deposits made directly to your bank account.

  4. Subtract all withdrawals made against your bank account that you had not accounted for in your cash book.

  5. Add all payments received but not yet recorded in your bank account.

  6. Subtract all amounts written in cheques as payment but which have not yet been cashed.

How often should I create a bank reconciliation statement for my business?

While a business may choose to prepare its bank reconciliation statement at any time, it is best to prepare it once per month after you receive the bank statement for your business.

Why should I create my bank reconciliation statement on a monthly basis?

Here are four reasons why your bank reconciliation statement should be made monthly:

  • To avoid financial complications such as late fees or late payments;
  • To be aware of the company's actual financial standing as against what is shown on the bank statement;
  • Most banks send out bank statements at the end of each month; and
  • To ensure you are not being billed for programs or services you no longer use.
Adena Benn
Adjustments to cashbook
Cash book balance
$
Automatic bank payments
$
Bank charges
$
NSF cheques
$
Interest earned
$
Receivable
$
Adjusted ending balance
$
Adjustments to bank statements
Bank balance
$
Deposit in transit
$
Unpresented cheques
$
Adjusted ending balance
$
When your bank reconciliation is complete your unreconciled difference must be 0.
Unreconciled difference
$
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