Before exploring bank reconciliation sample, it is worth to remind yourselves bank reconciliation process, which has the following main steps:
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1st step: we identify and calculate the difference between bank statement and cash book
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2nd step: we compare cash book and bank statement and see any differences which are on the bank statement, but not in the cash book. These items will represent informational differences, by which we will be adjusting cash book
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3rd step: we adjust cash book recording information differences there
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4th step: we identify any items which are on the cash book, but not yet in the bank statement, which will be timing differences, i.e. payments received or made, but not yet cleared by the bank. These items will be included into the bank reconciliation.
No we are ready to explore bank reconciliation sample. Below you can find cash book and bank statement of company ABC for January.
On the cash book you see opening cash balance at the beginning of January. On the left side you have cash inflows, i.e. cash received by the company in January, on the left side you can see cash payments made by ABC in January. Final cash book closing balance is $2348.
On the bank statement you can see details of each transaction. In the Outflow column you can see payments from ABC bank account cleared by the bank, each such payment if supported by cheque has a reference number. In the column Inflow you can see payments received into the bank account of ABC based on the cheques received. Some payments could be received directly to the bank account.
Adjust Cash Book By Informational Differences
So our first task to solve this bank reconciliation sample is to compare bank statement and cash book and identify items on the bank statement which are not in the cash book. In the picture below you can see those items, i.e. circled in red: payment made to British way directly from bank account and payment received from BC Way directly to the bank account. These items are included into the adjusted cash book, which is presented below.
So how we adjust cash book? We take non-adjusted cash book balance at the end of month, add payments received directly to the bank account (from BC Way amounting to $1000) and deduct payments made directly from bank account (to British way amounting to $100) and get adjusted cash book balance amounting to $3338.
Identify Timing Differences
Next what we do is to find items on the cash book which are not on the bank statement. These will be timing differences, i.e. items paid or received by not yet cleared by the bank and they will be included into the bank reconciliation sample. Picture below shows such items on the cash book circled in red.
On January 31 $1566 was received from Koala, but not yet cleared by the bank and included into the bank statement. On January 28 and 31 accordingly ABC company paid to Logypol and Dizzy amounting accordingly to $234 and $540, which were also not included into the bank statement. These items will be included into the bank reconciliation.
Bank Reconciliation Statement Example
Below based on the above data you can see bank reconciliation sample, which reconciles balance in the adjusted cash book with the bank statement and explains differences.
To make such reconciliation we start from adjusted cash book balance of $3338. Add to this amount cheques not yet presented to the bank, i.e. payments to Logypol and Dizzy amounting accordingly to $234 and $540. Intermediate amount is $4112.
Afterwards we deduct from the intermediate amount payments accepted by the bank after the end of January, i.e. payment from Koala amounting to $1566. By making these calculations we get the final amount of $2546 which is the same as per bank statement at the end of January.
So finally in this bank reconciliation sample we have adjusted cash book and reconciles adjusted cash book balance with the bank statement explaining differences which are due to different timing of payments recorded on the cash book and bank statement.