How to use the bank reconciliation template
- Enter the ending balance on the bank statement.
- List the deposits in transit and the outstanding checks and payments that your books show but the bank has not yet processed.
- Enter the ending balance in your books, the interest the bank added and the fees not yet in your books. In More options, add returned deposits and any corrections.
- Read whether the adjusted bank and book balances match, the difference if they do not, and the entries to record.
Formula
adjusted bank = statement balance + deposits in transit - outstanding checks +/- bank error
adjusted book = book balance + interest - fees - returned deposits +/- book correction
difference = adjusted bank - adjusted book
Both sides are added in whole cents, and negative amounts show in parentheses. When the difference is zero, the account is reconciled.
A month-end reconciliation
The bank statement shows $12,480.35. A deposit of $1,250.00 made on the 30th is in transit, and checks of $420.10 and $88.00 have not cleared, so the adjusted bank balance is $12,480.35 + $1,250.00 - $508.10 = $13,222.25.
The books show $13,244.15. The bank added $3.10 of interest and charged a $25.00 fee that the books do not have yet, so the adjusted book balance is $13,244.15 + $3.10 - $25.00 = $13,222.25. The difference is $0.00 and the account is reconciled. The entries to record are interest income of $3.10 and a fee expense of $25.00. Leaving out the $88.00 check would show a difference of $88.00.
Why the two balances differ
Your books and the bank record the same account but at different moments. A check you wrote has left your books but may not reach the bank for days, and a deposit you made late in the month may not appear on the statement. Those timing differences, deposits in transit and outstanding checks, change the bank side. Items the bank records that you have not yet, such as fees, interest and returned deposits, change the book side.
Each adjustment brings the two toward a common true balance. When both adjusted balances agree, every difference is explained. When they do not, a transaction is missing, wrongly recorded or entered with the wrong amount, and the remaining difference is the size of the problem.
Working through a mismatch
Compare the statement with your records line by line. Tick off each transaction that appears in both, and what remains unticked on each side is a candidate: a check not yet cleared, a deposit not yet shown, or an item entered twice. A difference equal to a single transaction often means it was missed on one side, and a difference twice a transaction can mean it was recorded on the wrong side.
Once reconciled, record the book-side items. The page lists the entries for interest, fees and returned deposits. The Journal Entry Generator writes them, the General Ledger Template holds them, the Petty Cash Log Template and the Cash Drawer Count Sheet track cash, and the Trial Balance Checker tests the books as a whole. This is a working schedule, not an accounting standard.
Assumptions and limits
- All amounts are in dollars and cents with no more than two decimals. Items in the lists are above zero.
- Outstanding checks are subtracted from the bank side, and deposits in transit are added to it.
- Corrections can be positive or negative, and the others are entered as positive numbers.
- Nothing is stored or uploaded. Your accountant may prefer another layout.
Frequently asked questions
What is a bank reconciliation?
It is a comparison of your records with the bank statement for the same date. You adjust each for items the other does not yet show, and when the adjusted balances agree, the account is reconciled.
What are outstanding checks and deposits in transit?
Outstanding checks are checks you wrote that the bank has not yet paid. Deposits in transit are deposits you recorded that have not yet reached the statement. Both are timing differences on the bank side.
What do I do if the balances do not match?
Check the amounts you entered, compare each transaction with the statement, and look for a missing item. The size of the difference points to a single missing or doubled transaction when it equals one amount.
Which items need a journal entry?
Items on the book side: interest the bank added, fees it charged, and deposits returned unpaid. The page lists a suggested entry for each. Timing items on the bank side need no entry.