How to Reconcile a Bank Statement Step-by-Step

Bank reconciliation involves comparing your financial records with your bank’s records for your account. This confirms accurate money flow and financial data integrity. It identifies discrepancies, corrects errors, and detects unauthorized transactions or fraud, safeguarding financial well-being. Regular reconciliation maintains precise financial oversight for individuals and businesses.

Gathering Your Financial Records

Collect all necessary documents before reconciling. The primary document, the bank statement, summarizes all transactions processed through your account, typically monthly. It lists deposits, withdrawals, transfers, fees, and interest. It is the bank’s official record, showing beginning and ending balances for the statement cycle.

Your personal or business transaction record is an important internal log of financial activities. This can be a checkbook register, spreadsheet, or accounting software. Unlike the historical bank statement, your record reflects transactions as they occur, including checks, debit purchases, and deposits, often before they appear on the bank statement. It provides your running balance based on your initiated transactions.

Supporting documents bolster record accuracy. These include receipts, deposit slips, and electronic payment confirmations. They provide tangible proof for transactions, invaluable for verifying entries or investigating discrepancies. All three document types are indispensable for complete reconciliation.

Performing the Reconciliation Steps

Reconciliation begins by comparing bank statement entries against your personal transaction record. Review and match bank statement deposits against your ledger. Checkmark each matching deposit in both records to indicate it has cleared. This helps track completed comparisons.

Next, compare withdrawals, checks, and debit card transactions on the bank statement with your internal records. Similar to deposits, mark off each transaction in both locations once matched. Pay close attention to dates and amounts; discrepancies can indicate an error or uncleared item. This ensures every initiated transaction has been processed by the bank.

As you compare, identify bank credits not yet in your records, like interest earned. Interest earned appears on statements. Similarly, note bank debits like service fees, ATM fees, or overdraft charges. Add or subtract these items from your personal transaction record to reflect bank-initiated adjustments.

After matching cleared transactions, you will have outstanding items: recorded in your ledger but not yet on the bank statement. Examples include recently written checks not yet cashed, or deposits made close to the statement date not yet processed. Account for these outstanding items to determine your true available balance.

To calculate your adjusted bank balance, start with the bank statement’s ending balance. Add outstanding deposits recorded but not yet on the statement. Then, subtract outstanding checks or withdrawals written but not yet cleared. This provides a revised bank balance considering all known transactions.

Simultaneously, calculate your adjusted register balance. Start with your personal transaction record’s ending balance. Add bank credits, like interest earned, noted from the statement and not yet in your record. Subtract bank debits, like service charges or ATM fees, from the statement not in your ledger. The final goal is for your adjusted bank balance to match your adjusted register balance, confirming both records’ accuracy.

Investigating Unbalanced Statements

If your adjusted bank balance does not match your adjusted register balance after reconciliation, a discrepancy requires investigation. Common reasons include mathematical errors in your personal record, forgotten transactions, duplicate entries, or bank errors. Uncleared items not properly accounted for also contribute to an imbalance, especially if miscalculated or overlooked.

A methodical approach pinpoints errors when an imbalance occurs. Recheck calculations for both adjusted balances. Often, a small arithmetic mistake, like an addition or subtraction error, is the sole cause. Next, review transactions for missing or duplicate entries, looking for common errors like transposed numbers or incorrect amounts.

Verify all transaction dates. Transactions may clear after the statement period, or deposits might be recorded on incorrect dates. A small, round difference might point to a simple data entry error. Patience and thoroughness are paramount; rushing can lead to overlooking mistakes.

If your review reveals an imbalance and you suspect a bank error, contact your financial institution. Provide specific details: account number, statement date, and exact transactions. Supporting documentation, like deposit slips or canceled checks, aids the bank’s investigation. Banks typically investigate discrepancies, which can take several business days to resolve and correct errors.