Bank Reconciliation with an example

In this article, we cover Bank reconciliation with an example. When we prepare our books, we believe that the same should reflect in our bank records. But, that doesn’t happen at all times.

A few of the reasons could be:

1. Bank’s Service charges,
2. Outstanding Checks,
3. Interest Income,
4. A pending Deposit, etc.

Clearly, if that happens then data in our books won’t match with data available through the bank. In other words, the cash balances in our records don’t match the cash balances held with the bank.

So, there is a discrepancy. And, to get rid of it, we do a bank reconciliation process.

Bank Reconciliation with an example

Through the Bank Reconciliation process, we prepare an accounting statement that helps us match the Cash Balance in our books with the cash balance held at the bank. Now, understand it with the help of an example.

For company ABC, as on May 31, 2023:

Cash Balance held at the bank: $100,000

Cash Balance in the company’s books: $93,650

Bank’s Service Charges: $150

Interest Income: $1,500

Pending Deposit: $5,000

Outstanding Checks: $10,000

Now, we prepare a Bank reconciliation statement using the above data for Company ABC.

Company ABC
Bank Reconciliation as on May 31, 2023

It is necessary to do Bank Reconciliation on a regular basis. This makes sure that all the transactions that are settled by our bank get also recorded in our books on time. If there is an issue then, we would be able to find that out.

In conclusion, we have covered here Bank Reconciliation with an example. It helps us match cash balance data in our books with the cash held at the banks.