It is a process performed by a company, usually difference may occur between bank balance in company books of records and bank balance in bank records. This may be due to checks deposited but not cleared, checks issued but not presented for payment and other service charges directly deducted by the bank, due to this company prepare a reconciliation statement to know the difference.
Below are the transactions generally appearing in company’s books accounts but not in the bank statement.
Deposits in Transit
Generally, once you have been received check from customer, you have to send to the bank for collection of the payment during this process it may take two or three days time to collect money or amount credited to your bank account.
In the above case company accountant has been recorded the check deposited transaction into their accounting system, but whereas in bank records when bank collects the money only it updated in bank records.
The check has been received on 30th April 2017 from a customer and the same has been recorded in company books of accounts and the same has been deposited in the bank, but here deposits in transit it may take 2 or 3 days time to update in the bank statement. In this case when you perform the reconciliation for the month of April 2017, the bank balance will not match between company books of accounts and bank statement, because the amount has been recorded in company books of accounts and not recorded/updated in bank records.
Checks have been issued by the company to their vendors due to outstanding payments, the checks have been recorded immediately in company books of accounts, but the issued checks have not yet reached the bank for clearing.
The check issued on 29th April 2017 and the same have been recorded immediately in the company’s books of accounts, but whereas in bank records not updated, because it may take 2 or 3 days time to clear the check, and the receiver of the check also need to send to the bank for deposit.
Below are the transactions generally appearing in bank statement but not in company’s books of accounts.
Bank service charges have been deducted by the bank, the same got updated in bank statement, but not recorded in the company’s books of accounts.
In this case when you have received a statement from the bank then you came to know that how much bank charges have been debited by the bank.
If a company earned any interest income from its bank account, the same got updated in bank statement, but not recorded in company’s books of accounts.
In this case when you received a statement from the bank then you came to know that how much interest income have been credited to your account.
Also, sometimes due to the insufficient funds in bank account bank will deduct some charges and the same have been recorded in the bank statement, but those charges will not record company’s books of accounts until you receive a statement from the bank.
Bank balance showing as per the bank statement dated 31st May 2017 is $28,000, and the bank balance showing on the same date as per the company’s records is $26,500.
Below checks issued by a company to its vendors, still have not yet cleared by the bank
Vide check No. 143 issued on May 15 $440
Vide check No. 144 issued on May 28 $140
Vide check No. 145 issued on May 29 $500
Bank charges debited by the bank of $70 May 20th
The bank collected receivable amount on behalf of the company of $1050 on 24th May
A check of $200 was deposited by the company the same has been charged back as NSF
Interest received from the bank of $840 and the same updated in bank records 30th May
Check sent for deposit on 30th May of $1200, the same has been recorded in company books of accounts and does not appear in bank records
Bank reconciliation for the month of 31st May 2016
Balance as per bank statement as on 31st May 2016 $28,000