| Author: Donald Cook, JD, CPA (Retired)
How to make a bank reconciliation
Bank reconciliation is the process of comparing your company's records of its financial transactions with the records provided by your bank to ensure they match. This process helps identify any discrepancies, errors, or missing transactions. Here are the steps to make a bank reconciliation:
Step 1: Gather Documents Collect all the necessary documents and records you'll need for the reconciliation process:
- Bank Statement: Obtain the most recent bank statement from your bank. This statement will show all the transactions the bank has processed for your account.
- Company Records: Gather your company's financial records, including your general ledger, cash book, checkbook, and any other records of financial transactions.
Step 2: Identify Outstanding Transactions Outstanding transactions are transactions that have been recorded in your company's books but have not yet been processed by the bank. These typically include:
- Deposits that you've made but haven't yet appeared on the bank statement.
- Checks or payments issued by your company that haven't cleared the bank.
- Bank fees or interest charges that are not yet reflected in your records.
Step 3: Reconcile Bank Statement Now, you'll reconcile the bank statement with your company's records. Follow these sub-steps:
a. Starting Balance: Begin by comparing the starting balance on your bank statement with the starting balance in your records. They should match.
b. Add Deposits: List all the deposits recorded in your company's records that haven't yet appeared on the bank statement. Add these to the bank statement's balance.
c. Deduct Outstanding Checks: List all the checks or payments issued by your company that haven't cleared the bank. Deduct the total amount of these outstanding checks from the adjusted bank statement balance.
d. Adjust for Other Transactions: Account for any other transactions that may appear on your company's records but not on the bank statement. This may include bank fees, interest, or any errors.
Step 4: Reconcile and Verify At this point, your adjusted bank statement balance should match the balance in your company's records. If they do not match, you need to investigate and resolve the discrepancies. Common reasons for discrepancies include errors in recording transactions, bank processing delays, or missing transactions.
Step 5: Make Adjustments If discrepancies are found and verified, make the necessary adjustments in your company's records to match the bank statement. This might involve correcting errors, recording missing transactions, or addressing outstanding checks.
Step 6: Document Reconciliation Properly document your bank reconciliation process, including any adjustments made. This documentation is important for auditing purposes and future reference.
Step 7: Repeat Regularly Perform bank reconciliations on a regular basis, ideally every month, to ensure your financial records remain accurate and up to date. This will help you catch errors or discrepancies early and maintain financial control.
Automated accounting software can simplify the bank reconciliation process by matching transactions automatically, but it's still essential to verify the accuracy of the reconciled data regularly.
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Per Bank Statement- Request for Payment (RfP) as Payee FedNow Not Cleared(see [Sheet 1])When you've sent a Request for Payment (RfP) as the
Payee in the FedNow or RTP system, and the payment has not yet
cleared, it's crucial to manage this situation properly to
maintain accurate financial records. If you record a Debit entry to 'Bank Account' General Ledger upon upload Request for FedNow or RTP file to your Bank/Credit Union, then complete Sheet 1. On FedNow or RTP Sheet 1 keep a list of outstanding Accounts Receivable FedNow or RTP transactions. Add for all sent Request for Payments and Subtract for all deposited transactions into our bank reconciliation template. ISO 20022 allows Request for Payment to stay 'open' for 365 days and evaporates until the Payee instruct other date finality. Our DYNAMIC Bank Reconciliation records 12 months RfP's until cleared. When Payer sents funds to Payee, our system automatically "Merge, Match and then Delete" Open RfP's (see [Sheet 1]) on our Dynamic Bank Reconciliation. 1. Record the RfP: In your accounting system, create a record for the RfP you received. Include all relevant details, such as the payer's information, payment amount, RfP reference number, and the date it was initiated. Categorize it as "Uncleared" or "Pending" to indicate that the payment has not yet been confirmed. 2. Review Bank Statements: Regularly review your bank statements to monitor the status of the RfP. Banks typically provide transaction details, including whether the RfP has been processed and cleared. 3. Contact the Payer: If the RfP remains uncleared for an extended period or if there is any doubt about the payment, consider reaching out to the payer. You can inquire about the status of the payment and request confirmation that the RfP was initiated correctly. This communication can help you understand if there are any issues on the payer's end that are causing the delay. 4. Bank Communication: If necessary, contact your bank to inquire about the status of the RfP. They may be able to provide information on any potential delays or issues with the transaction. It's also a good opportunity to verify that your bank has not identified any discrepancies or problems with the payment. 5. Reconciliation Process: Once the RfP clears and is reflected in your bank statement, update your accounting records to indicate that the payment has been "Cleared" or "Processed." Ensure that the details on the bank statement match the information in your accounting system. 6. Documentation: Keep a record of all communication with the payer and your bank regarding the RfP. Documenting these interactions can be valuable if there are any disputes or discrepancies that need to be resolved. 7. Follow Up: Continue to monitor your bank statements and financial records to ensure that all RfPs and transactions are accurately reflected. If any issues persist, follow up with the payer or your bank as needed until the situation is resolved. 8. Reconciliation Tools: Consider using reconciliation tools provided by your accounting software or banking platform to streamline the process. These tools can help match transactions on your bank statement with those in your accounting records. Remember that the timing of RfP clearing can vary depending on several factors, including banking processes and the actions of the payer. Promptly addressing any delays or discrepancies will help ensure that your financial records remain accurate and up-to-date. - Request for Payment (RfP) as Payee RTP Payments Not Cleared(see [Sheet 2])When you've sent a Request for Payment (RfP) as the
Payee in the FedNow or RTP system, and the payment has not yet
cleared, it's crucial to manage this situation properly to
maintain accurate financial records. If you record a Debit entry to 'Bank Account' General Ledger upon upload Request for FedNow or RTP file to your Bank/Credit Union, then complete Sheet 2. On FedNow or RTP Sheet 2 keep a list of outstanding Accounts Receivable FedNow or RTP transactions. Add for all sent Request for Payments and Subtract for all deposited transactions into our bank reconciliation template. ISO 20022 allows Request for Payment to stay 'open' for 365 days and evaporates until the Payee instruct other date finality. Our DYNAMIC Bank Reconciliation records 12 months RfP's until cleared. When Payer sents funds to Payee, our system automatically "Merge, Match and then Delete" Open RfP's (see [Sheet 2]) on our Dynamic Bank Reconciliation. 1. Record the RTP Payment: In your accounting system, create a record for the RTP payment you received. Include all relevant details, such as the payer's information, payment amount, RTP reference number, and the date it was initiated. Categorize it as "Uncleared" or "Pending" to indicate that the payment has not yet been confirmed. 2. Review Bank Statements: Regularly review your bank statements to monitor the status of the RTP payment. RTP payments are designed to be processed in real-time, so they should clear shortly after initiation. If the payment does not clear promptly, it may be worth investigating. 3. Contact the Payer: If the RTP payment remains uncleared for an extended period or if there are any concerns about the payment, consider reaching out to the payer. Politely inquire about the status of the payment and request confirmation that the RTP was initiated correctly. This communication can help you understand if there are any issues on the payer's end that are causing the delay. 4. Bank Communication: If necessary, contact your bank to inquire about the status of the RTP payment. They may be able to provide information on any potential delays or issues with the transaction. It's also a good opportunity to verify that your bank has not identified any discrepancies or problems with the payment. 5. Reconciliation Process: Once the RTP payment clears and is reflected in your bank statement, update your accounting records to indicate that the payment has been "Cleared" or "Processed." Ensure that the details on the bank statement match the information in your accounting system. 6. Documentation: Keep a record of all communication with the payer and your bank regarding the RTP payment. Documenting these interactions can be valuable if there are any disputes or discrepancies that need to be resolved. 7. Follow Up: Continue to monitor your bank statements and financial records to ensure that all RTP payments and transactions are accurately reflected. If any issues persist or if you encounter repeated delays in RTP payments, follow up with the payer or your bank as needed until the situation is resolved. 8. Reconciliation Tools: Consider using reconciliation tools provided by your accounting software or banking platform to streamline the process. These tools can help match transactions on your bank statement with those in your accounting records. Remember that RTP payments are designed for real-time processing, so they should clear promptly. If you experience persistent delays or issues with RTP payments, it's important to investigate and address the underlying causes to ensure the smooth flow of funds and maintain accurate financial records. - Deposits in Transit not Collected(see [Sheet 3])When performing a bank reconciliation and you have deposits in transit that have not yet been collected by your bank, it's important to properly account for these outstanding deposits to ensure your financial records accurately reflect your cash position. Here's how to handle deposits in transit: 1. Identify Deposits in Transit: Deposits in transit are deposits that you have recorded in your accounting records but have not yet been processed by your bank. These typically occur when you deposit checks or other forms of payment into your bank account, but there is a delay in the bank's processing. 2. Review Bank Statement: Examine your bank statement to see if the deposits in transit are listed. These deposits may be included in the statement as "outstanding deposits" or something similar. Make note of the date they were expected to clear. 3. Record Deposits in Transit: In your accounting system, create a separate category for deposits in transit or outstanding deposits. Record the details of these deposits, including the amount, date, source (e.g., customer payments), and the date they were entered into your accounting records. 4. Reconciliation Process: When you perform your bank reconciliation, compare the deposits in transit on your bank statement to the deposits in transit recorded in your accounting system. These amounts should match. If they do not, investigate the discrepancies to ensure accuracy. 5. Adjustment Entries: If your bank reconciliation reveals discrepancies between the deposits in transit on your bank statement and in your accounting records, you may need to make adjustment entries. For example, if a deposit in transit recorded in your accounting system was never received by the bank, you should remove it from your records to reflect the correct cash balance. Conversely, if there are deposits on your bank statement that were not recorded in your accounting system, you should add them to your records. 6. Documentation: Maintain clear documentation of all deposits in transit, including deposit slips, receipts, and any communication with your bank. This documentation can be helpful for auditing purposes and for resolving any discrepancies. 7. Monitor Regularly: Continue to monitor and reconcile deposits in transit regularly, especially if there is a history of delays or discrepancies. This helps ensure that your financial records remain accurate. 8. Follow Up with the Bank: If deposits in transit continue to be delayed or there are issues with processing, consider contacting your bank to inquire about the status of these deposits and seek resolution. By following these steps, you can effectively manage deposits in transit during your bank reconciliation process and maintain accurate financial records, helping you make informed financial decisions. - Deposit ACH Transactions Not Cleared(see [Sheet 4])Recording ACH (Automated Clearing House) transactions that have not yet cleared in your bank reconciliation process is an essential part of accurate financial record-keeping. Here's how you can record these transactions:
Remember that the specific steps may vary depending on your accounting software and business needs. It's also a good practice to consult with an accountant or financial advisor to ensure that your ACH transaction recording and reconciliation process aligns with best practices and regulatory requirements. - Other / Bank Errors(see [Sheet 5])When recording additions into a bank reconciliation due to other or bank errors, you are essentially documenting corrections to your financial records to account for discrepancies or mistakes made by the bank or other parties involved. Here's how to handle such additions: 1. Identify the Errors: Before you can correct the errors, you need to identify and document them. Common errors include: · Bank errors: Mistakes made by the bank, such as processing errors, posting incorrect amounts, or failing to credit your account properly. · Other errors: Mistakes made by other parties, such as customers or vendors, that affect your bank transactions. 2. Document the Errors: Create a detailed record of each error, including the nature of the error, the date it occurred, and any relevant reference numbers or supporting documentation. This documentation will be crucial for both your own records and for any potential communication with the bank or other parties involved. 3. Record the Corrections in Your Accounting System: Depending on the nature of the errors, you may need to make adjustments in your accounting system. This might involve: · Adding missing deposits or credits to your bank account if they were not initially recorded by the bank. · Correcting transaction amounts or dates if the bank made errors in processing. · Adjusting your account balances to reflect the correct amounts after addressing the errors. 4. Categorize as "Bank Adjustments" or Similar: When recording these corrections in your accounting system, categorize them appropriately. You might use categories like "Bank Adjustments," "Bank Error Corrections," or something similar to distinguish these entries from regular transactions. 5. Bank Reconciliation: When you perform your bank reconciliation, ensure that the corrected entries are included in your reconciliation process. Match these corrections with the corresponding entries on your bank statement. 6. Reconciliation Tools: If you have access to reconciliation tools in your accounting software, utilize them to help identify and resolve discrepancies between your records and the bank statement. 7. Communication with the Bank: If the errors were due to bank mistakes, contact your bank to report the issues and provide any necessary documentation. They should be able to assist in correcting the errors on their end. 8. Documentation: Keep thorough records of all communications, transactions, and adjustments related to these errors. Proper documentation is essential for auditing and future reference. 9. Preventive Measures: After correcting the errors, consider implementing preventive measures to reduce the likelihood of similar errors in the future. This may involve reviewing bank statements regularly, reconciling accounts promptly, and ensuring that all parties involved in financial transactions are accurate and reliable. 10. Review and Confirm: Once you've made corrections and reconciled your accounts, review your financial statements to ensure they now accurately reflect your financial position. Handling corrections due to bank errors or other errors in your bank reconciliation is essential for maintaining accurate financial records. By following these steps, you can address discrepancies and ensure that your financial statements are reliable for decision-making and reporting purposes. - Checks Issued Not Cleared(see [Sheet 6])When you need to record subtractions in your bank reconciliation for checks that you issued but have not yet cleared, it's important to accurately document these outstanding checks to ensure your financial records are up-to-date. Unlike FedNow & RTP that receives into the Bank Account. Checks are received to the office before deposited into Bank. Here's how to handle these situations: 1. Identify Outstanding Checks: Review your bank statement to identify any checks that you've issued but have not yet cleared. Outstanding checks are checks that have been recorded in your accounting records but have not been cashed or processed by the payee's bank. 2. Record Outstanding Checks in Your Accounting System: In your accounting software or system, create a record for each outstanding check. Include the check number, payee information, the check amount, and the date it was issued. Categorize these checks as "Outstanding" or "Uncleared" to indicate that they have not been processed by the bank. 3. Reconciliation Process: When you perform your bank reconciliation, compare the outstanding checks on your bank statement to the records in your accounting system. Ensure that the amounts and details match. 4. Documentation: Keep clear documentation of these outstanding checks, including check copies, check stubs, or any other relevant records. This documentation is important in case you need to follow up or resolve discrepancies in the future. 5. Subtract Outstanding Checks: In your bank reconciliation statement or tool, subtract the total amount of outstanding checks from your bank balance. This adjustment will bring your bank statement balance in line with your actual available cash balance. 6. Reconciliation Tools: If you're using a reconciliation tool in your accounting software, it can help streamline the process by automatically identifying outstanding checks and matching them with the bank statement. 7. Regular Monitoring: Continue to monitor the status of outstanding checks regularly. If any checks eventually clear, update your accounting records to reflect this by changing their status to "Cleared." 8. Bank Communication: If you have concerns about the status of specific outstanding checks or if they have been outstanding for an extended period, you may want to contact the payees to verify whether they have received and deposited the checks. 9. Adjustment Entries: If you discover any discrepancies between your records and the bank statement during the reconciliation process, make the necessary adjustment entries in your accounting system to correct your books. 10. Review and Confirm: After adjusting for outstanding checks, review your financial statements to ensure they accurately reflect your current financial position. By following these steps, you can effectively manage outstanding checks during your bank reconciliation process and ensure your financial records remain accurate and up-to-date. - Send ACH Transactions Not Cleared(see [Sheet 9])When performing a bank reconciliation and you have credit ACH (Automated Clearing House) transactions that have not yet cleared, you'll need to record these uncleared transactions as subtractions from your bank balance to ensure accurate financial records. Here's how to handle this: 1. Identify Uncleared Credit ACH Transactions: Review your bank statement to identify the credit ACH transactions that have not yet cleared. These are transactions that have been initiated but have not been processed or cleared by your bank. 2. Record the Uncleared Transactions: In your accounting software or ledger, create a record for each uncleared credit ACH transaction. Include all relevant details, such as the transaction date, transaction amount, payer's information, and a description of the transaction. Categorize these transactions as "Uncleared" or "Pending" to distinguish them from cleared transactions. 3. Reconciliation Process: When you perform your bank reconciliation, subtract the total amount of uncleared credit ACH transactions from your bank statement balance. This adjustment is necessary to bring your bank statement balance in line with your actual available cash balance. 4. Documentation: Maintain clear documentation of these uncleared credit ACH transactions, including transaction details, reference numbers, and any communication with relevant parties. Proper documentation is essential for auditing and resolving discrepancies. 5. Bank Reconciliation Tools: If your accounting software offers reconciliation tools, use them to help identify and track uncleared transactions during the reconciliation process. 6. Regular Monitoring: Continue to monitor the status of these uncleared transactions regularly. If any transactions eventually clear, update your accounting records to reflect this by changing their status to "Cleared." 7. Communication with the Bank: If the uncleared credit ACH transactions have not cleared for an extended period or if there are concerns about their status, consider contacting your bank to inquire about potential delays or issues with the transactions. 8. Adjustment Entries: If you discover discrepancies between your records and the bank statement during the reconciliation process, make the necessary adjustment entries in your accounting system to correct your books. 9. Review and Confirm: After making the adjustments for uncleared credit ACH transactions, review your financial statements to ensure they accurately reflect your current financial position. By following these steps, you can effectively manage uncleared credit ACH transactions during your bank reconciliation process and maintain accurate financial records. - Send FedNow Transactions Not Cleared(see [Sheet 8])Reporting on Sent FedNow transactions that have not yet cleared in a bank reconciliation involves keeping track of outstanding transactions and reconciling them appropriately. Here's a general guide on how to handle this situation:
Remember that it's crucial to maintain accurate and up-to-date records to ensure the integrity of your financial information. Regular reconciliation helps identify and address discrepancies promptly. If you're uncertain about specific procedures or if your organization has unique requirements, it's advisable to consult with a financial professional or your bank for guidance. - Send RTP Transactions Not Cleared(see [Sheet 9])Reporting on Sent Real-Time Payments (RTP) transactions that have not yet cleared in a bank reconciliation involves a process similar to that for other types of transactions. Here's a step-by-step guide:
Consistent and thorough reconciliation practices are essential for maintaining accurate financial records. If you encounter challenges or have specific questions about Real-Time Payments reconciliation, consider consulting with financial professionals or reaching out to your bank for guidance, as procedures may vary based on banking institutions and financial systems. - Other / Bank Errors(see [Sheet 10])When you need to record subtractions in your bank reconciliation for other transactions or bank errors, you are essentially documenting adjustments to your financial records to correct discrepancies or errors made by the bank or other parties. Here's how to handle these situations:
By following these steps, you can effectively manage adjustments for other transactions or bank errors during your bank reconciliation process and ensure your financial records remain accurate and up-to-date. |
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Per General Ledger- Receive FedNow Transactions(see [Sheet 11])Recording FedNow transactions in your General Ledger and reconciling deposited undeposited funds is a crucial part of managing your company's finances. FedNow is a real-time payment system operated by the Federal Reserve, and it's used for instant fund transfers. To record these transactions and reconcile your General Ledger, follow these steps: 1. Create a New FedNow Transaction Entry: When you receive funds through FedNow, record the transaction in your General Ledger. The specific accounts you debit and credit may depend on the nature of the transaction, but for simplicity, we'll assume it's a deposit into your bank account. Debit: Bank Account Credit: FedNow Receivables This entry reflects the deposit of funds received through FedNow into your bank account. It increases your bank account balance and credits a FedNow Receivables account to track these transactions. 2. Record the Bank Reconciliation Entry: Next, you need to reconcile the deposited undeposited funds. Assuming you had funds in an "Undeposited Funds" account that are now deposited via FedNow: Debit: FedNow Receivables Credit: Undeposited Funds This entry reflects the movement of funds from the "Undeposited Funds" account to the "FedNow Receivables" account. It shows that the funds have been transferred from an undeposited state to your FedNow Receivables account. 3. Finalize the Bank Reconciliation: To complete the reconciliation process, you'll need to transfer the funds from the "FedNow Receivables" account to your bank account. Debit: Bank Account Credit: FedNow Receivables This entry ensures that your bank account reflects the accurate balance after the FedNow transaction is fully reconciled. Make sure to include relevant details such as transaction dates, descriptions, and transaction IDs to keep your records accurate and traceable. It's also a good practice to regularly reconcile your accounts to ensure that your records match the actual transactions. Keep in mind that the specific accounts and journal entries you use may vary depending on your company's accounting system and policies. It's advisable to consult with your accountant or financial advisor to ensure that you're following the appropriate accounting procedures and adhering to any regulatory requirements. Recording the reconciliation of a General Ledger entry for deposited undeposited funds involves updating your accounting records to reflect the correct balance in your bank account. Deposited undeposited funds usually refer to funds that were received but not immediately deposited into the bank. When these funds are eventually deposited, you need to reconcile your records. Here's how to record this in your General Ledger: Assuming you're using a double-entry accounting system, you'll need to make two journal entries: 1. Depositing Undeposited Funds: Debit: Undeposited Funds Credit: Bank Account This entry reflects the movement of funds from your undeposited funds account to your bank account. You're essentially increasing your bank account balance while reducing the undeposited funds balance. 2. Bank Reconciliation Entry: Debit: Bank Account Credit: Deposited Undeposited Funds This entry represents the reconciliation, where you move the funds from your bank account to a "deposited undeposited funds" account. This account acts as an intermediary to show that these funds were once in the undeposited funds account but have now been deposited into the bank. In essence, you're shifting the funds from undeposited to deposited status by updating your General Ledger with these two entries. The final result should be that your bank account reflects the accurate balance after these funds are deposited. Remember to include the appropriate transaction dates and descriptions in your accounting software or ledger to maintain a clear record of the transaction. Additionally, consult with your accountant or financial advisor to ensure compliance with your specific accounting practices and regulations. - Receive Real-Time Payments Transactions(see [Sheet 12])Recording real-time payments (RTP) transactions in your General Ledger and reconciling deposited undeposited funds involves accurately tracking the flow of funds in real-time. RTP is a real-time payment system, and keeping your records up-to-date is crucial. Here's how to record these transactions and reconcile your General Ledger: 1. Create a New RTP Transaction Entry: When you receive funds through RTP, record the transaction in your General Ledger. The accounts you use for this entry may vary based on your company's specific accounts and accounting policies. However, for simplicity, we'll assume it's a deposit into your bank account: Debit: Bank Account Credit: RTP Receivables This entry reflects the deposit of funds received through RTP into your bank account. It increases your bank account balance and credits an RTP Receivables account to track these real-time transactions. 2. Record the Bank Reconciliation Entry: Next, you need to reconcile the deposited undeposited funds. Assuming you had funds in an "Undeposited Funds" account that are now deposited via RTP: Debit: RTP Receivables Credit: Undeposited Funds This entry reflects the movement of funds from the "Undeposited Funds" account to the "RTP Receivables" account, indicating that the funds have been transferred from an undeposited state to your RTP Receivables account. 3. Finalize the Bank Reconciliation: To complete the reconciliation process, you'll need to transfer the funds from the "RTP Receivables" account to your bank account: Debit: Bank Account Credit: RTP Receivables This entry ensures that your bank account accurately reflects the balance after the RTP transaction is fully reconciled. 4. Document Real-Time Payment Details: Include all relevant transaction details such as transaction dates, descriptions, and transaction IDs. Real-time payments are often accompanied by detailed payment information, so ensure you capture all relevant data. 5. Regular Reconciliation: Perform regular reconciliations to ensure that your records match the actual transactions. RTP transactions are typically processed instantly, so staying on top of these reconciliations is essential. Please note that the specific accounts and journal entries you use may vary based on your company's accounting system and policies. Consult with your accountant or financial advisor to ensure that you're following the appropriate accounting procedures and complying with any regulatory requirements, especially when dealing with real-time payments. - Receive Credit Card Transactions / Batch(see [Sheet 13])Recording credit card transactions in a batch and reconciling deposited undeposited funds is a common process for businesses that accept credit card payments. Here's how to record these transactions in your General Ledger and perform the bank reconciliation: 1. Record Credit Card Batch Transactions: When you process credit card transactions in a batch, you typically receive the total amount of the batch in your merchant account. Here's how to record this in your General Ledger: Debit: Bank Account (or Merchant Account) Credit: Sales Revenue This entry reflects the deposit of the total amount of the credit card batch into your bank account or merchant account. It increases your bank account balance and credits your sales revenue account. 2. Record the Bank Reconciliation Entry: Assuming you had funds in an "Undeposited Funds" account that are now being deposited from the credit card batch: Debit: Sales Revenue Credit: Undeposited Funds This entry reflects the movement of funds from the "Undeposited Funds" account to the "Sales Revenue" account, indicating that the funds have been transferred from an undeposited state to your sales revenue account. 3. Finalize the Bank Reconciliation: To complete the bank reconciliation process, you'll need to transfer the funds from your sales revenue account to your bank account: Debit: Bank Account (or Merchant Account) Credit: Sales Revenue This entry ensures that your bank account accurately reflects the balance after the credit card batch transactions are fully reconciled. 4. Document Credit Card Batch Details: Include all relevant details of the credit card batch, such as batch number, transaction dates, and descriptions. It's essential to keep detailed records for accounting and reconciliation purposes. 5. Reconciliation and Reporting: Reconcile your bank statements with your General Ledger regularly to ensure that your records match the actual transactions. This helps identify any discrepancies or errors. Please note that the specific accounts and journal entries you use may vary based on your company's accounting system and policies. Consult with your accountant or financial advisor to ensure that you're following the appropriate accounting procedures and complying with any regulatory requirements when recording credit card transactions in a batch and reconciling your accounts. - Bank Interest(see [Sheet 14])When you receive bank interest in addition to your regular account balance, you'll need to record this interest in your General Ledger during the bank reconciliation process. Here's how to do it: 1. Record the Bank Interest: Bank interest is typically credited to your account by the bank. To record this interest in your General Ledger, create a journal entry: Debit: Bank Interest Income Credit: Bank Account This entry reflects the increase in your bank account due to the interest income received. The "Bank Interest Income" account represents the interest earned from the bank. 2. Update the Bank Reconciliation: In your bank reconciliation, you should include the bank interest as an item that explains the difference between your General Ledger balance and the bank statement balance. The reconciliation process typically involves comparing your recorded transactions to the bank statement and noting any discrepancies. Include the bank interest income in the reconciliation as follows:
By including the bank interest income in your reconciliation process, you ensure that your General Ledger accurately reflects the interest received, and it helps you identify any potential errors or missing transactions. Remember to document the bank interest income with the appropriate transaction date and description in your General Ledger. Consult with your accountant or financial advisor to ensure that you're following the correct accounting procedures and maintaining accurate financial records. - Reverse Bank & NSF Charges(see [Sheet 15])Recording reverse bank charges and NSF (Non-Sufficient Funds) charges on your bank reconciliation per the General Ledger involves correcting errors or reversing incorrect charges that may have been previously recorded. Here's how to record these transactions: 1. Reverse Bank Charges: If you need to reverse bank charges that were incorrectly assessed, you should create a journal entry to adjust your General Ledger. Assuming the bank charged you $100 in error: Debit: Bank Charges (an expense account) Credit: Bank Account This entry decreases your Bank Charges expense account and increases your Bank Account, effectively reversing the incorrect charges. 2. NSF Charges: If you've assessed NSF charges to a customer but need to reverse them, you should create a journal entry to adjust your General Ledger. Assuming you need to reverse $50 in NSF charges: Debit: Accounts Receivable (to reduce the amount owed by the customer) Credit: NSF Charges Income (to reverse the income recognized) This entry reverses the income previously recognized for NSF charges and reduces the amount owed by the customer in your Accounts Receivable. 3. Update Your Bank Reconciliation: When you perform your bank reconciliation, you'll need to consider these adjustments: · Bank Charges Reversal: If the bank charges reversal is related to a transaction in your bank statement, make sure to reconcile the corrected bank charges in your bank reconciliation statement. Ensure that the bank statement balance reflects the adjusted charges. · NSF Charges Reversal: If the NSF charges reversal is related to customer transactions, make sure to reconcile the corrected Accounts Receivable balance in your bank reconciliation statement to reflect the adjusted amount. In your bank reconciliation statement, document these adjustments as part of the reconciliation process. You'll typically list any discrepancies or corrections between your General Ledger balance and your bank statement balance, along with explanations and the adjustment amounts. By recording these adjustments, you ensure that your General Ledger accurately reflects the corrected financial position and that your bank reconciliation statement accounts for any reversals or corrections made. This helps maintain the accuracy of your financial records and ensures that your bank statement matches your General Ledger. - Reverse Fraudulent Transactions(see [Sheet 16])Recording the reversal of fraudulent transactions on your bank reconciliation per the General Ledger is a critical step in correcting errors and ensuring the accuracy of your financial records. Here's how to record these transactions: 1. Identify the Fraudulent Transactions: Before you can reverse fraudulent transactions, you must first identify them. Work with your bank to confirm which transactions are fraudulent and need to be reversed. 2. Reverse the Fraudulent Transactions in Your General Ledger: Create journal entries to reverse the fraudulent transactions in your General Ledger. The specific accounts you use will depend on the nature of the fraudulent transactions and how they were initially recorded. For example, if the fraudulent transaction was recorded as an expense: Debit: Bank Account (to reduce the bank balance) Credit: Expense Account (to reverse the expense) If the fraudulent transaction was recorded as a revenue or income item: Debit: Revenue or Income Account (to reverse the revenue) Credit: Bank Account (to reduce the bank balance) Ensure that the journal entries reverse the effects of the fraudulent transactions completely. 3. Update Your Bank Reconciliation: When you perform your bank reconciliation, document these adjustments:
In your bank reconciliation statement, note that the fraudulent transactions have been reversed, and the corrected bank balance should reflect the removal of these transactions. 4. Report the Fraud: Report the fraudulent transactions to your bank and any relevant authorities. You may need to provide documentation and evidence to support your claim of fraud. This step is crucial for initiating an investigation and potentially recovering the funds. 5. Strengthen Internal Controls: After addressing the fraudulent transactions, review your internal controls to identify weaknesses that allowed the fraud to occur. Take steps to strengthen your controls and prevent future fraudulent activities. By recording the reversal of fraudulent transactions in your General Ledger and documenting them in your bank reconciliation statement, you maintain the accuracy of your financial records and ensure that your bank statement matches your General Ledger. Additionally, reporting the fraud is essential for pursuing any potential recovery of lost funds and preventing future incidents. - Credits(see [Sheet 17])Recording deposits of credit transactions in your bank reconciliation per the General Ledger involves ensuring that your bank statement accurately reflects the credits or deposits you've received. Here's how to record these transactions: 1. Identify and List the Credit Transactions: Before you start recording the transactions, review your bank statement to identify and list all the credit transactions or deposits that need to be reconciled. 2. Create Journal Entries to Record Deposits: For each credit transaction or deposit, create journal entries in your General Ledger. The specific accounts you use will depend on the nature of the credit and how it was initially recorded. Typically, you will debit an income or revenue account and credit your bank account: Debit: Income or Revenue Account (to recognize the credit) Credit: Bank Account This entry reflects the increase in income or revenue due to the credit transaction and the corresponding increase in your bank account. 3. Update Your Bank Reconciliation: When you perform your bank reconciliation, document these adjustments: · Credit Transactions: List the credit transactions you recorded in your General Ledger on your bank reconciliation statement. Include a clear explanation of each credit, its source, and the adjusted amounts. · Adjust the Bank Balance: Adjust the bank balance on your reconciliation statement to include the credits you've recorded. This ensures that your reconciled bank balance matches your General Ledger balance. 4. Reconcile Your Bank Statement: Reconcile your bank statement by comparing the adjusted bank balance on your reconciliation statement with the bank statement balance provided by your bank. Ensure that these two balances match. If they don't match, investigate and resolve any discrepancies. By recording credit transactions in your General Ledger and documenting them in your bank reconciliation statement, you ensure that your bank statement accurately reflects the credits received, and it helps you identify any potential errors or missing transactions. This reconciliation process is essential for verifying the accuracy of your financial records and ensuring that your bank statement aligns with your General Ledger. - Wire Transfers(see [Sheet 18])Recording deposits of wire transfer transactions in your bank reconciliation per the General Ledger involves ensuring that your bank statement accurately reflects the wire transfers you've received. Here's how to record these transactions: 1. Identify and List the Wire Transfer Transactions: Before you start recording the transactions, review your bank statement to identify and list all the wire transfer transactions or deposits that need to be reconciled. 2. Create Journal Entries to Record Wire Transfers: For each wire transfer transaction, create journal entries in your General Ledger. The specific accounts you use will depend on the nature of the wire transfer and how it was initially recorded. Typically, you will debit an income or revenue account and credit your bank account: Debit: Income or Revenue Account (to recognize the wire transfer) Credit: Bank Account This entry reflects the increase in income or revenue due to the wire transfer transaction and the corresponding increase in your bank account. 3. Update Your Bank Reconciliation: When you perform your bank reconciliation, document these adjustments: · Wire Transfer Transactions: List the wire transfer transactions you recorded in your General Ledger on your bank reconciliation statement. Include a clear explanation of each wire transfer, its source, and the adjusted amounts. · Adjust the Bank Balance: Adjust the bank balance on your reconciliation statement to include the wire transfers you've recorded. This ensures that your reconciled bank balance matches your General Ledger balance. 4. Reconcile Your Bank Statement: Reconcile your bank statement by comparing the adjusted bank balance on your reconciliation statement with the bank statement balance provided by your bank. Ensure that these two balances match. If they don't match, investigate and resolve any discrepancies. By recording wire transfer transactions in your General Ledger and documenting them in your bank reconciliation statement, you ensure that your bank statement accurately reflects the wire transfers received. This reconciliation process is essential for verifying the accuracy of your financial records and ensuring that your bank statement aligns with your General Ledger. - Other / Company Errors(see [Sheet 19])Recording other or company errors in your bank reconciliation per the General Ledger involves correcting discrepancies that may have occurred due to mistakes in your company's accounting or banking processes. Here's how to record these transactions: 1. Identify and Document the Errors: First, you need to identify and document the nature of the errors that need correction. This could include errors such as double entries, mispostings, or other inaccuracies in your company's accounting records. 2. Create Journal Entries to Correct the Errors: For each error identified, create journal entries in your General Ledger to correct the inaccuracies. The specific accounts and journal entries you use will depend on the nature of the errors. Generally, you will need to make offsetting entries to reverse the incorrect entries and record the correct ones. Here's a general guideline: To Correct an Overstatement of an Account:
To Correct an Understatement of an Account:
The key is to make journal entries that reverse the incorrect transactions and record the correct ones. Ensure that your corrected entries have the same value but the opposite effect as the incorrect entries. 3. Update Your Bank Reconciliation: When you perform your bank reconciliation, document these adjustments:
4. Reconcile Your Bank Statement: Reconcile your bank statement by comparing the adjusted bank balance on your reconciliation statement with the bank statement balance provided by your bank. Ensure that these two balances match. If they don't match, investigate and resolve any discrepancies. By recording error corrections in your General Ledger and documenting them in your bank reconciliation statement, you ensure that your financial records are accurate and that any mistakes are corrected. This reconciliation process helps verify the accuracy of your bank statement and ensures that it aligns with your General Ledger. - Send FedNow / RTP Transactions / Modifications(see [Sheet 20])Recording the subtraction or
adjustment for sent FedNow, Real-time Payments (RTP)
transactions, or modified transactions on your bank
reconciliation per the General Ledger is essential for
maintaining accurate financial records. Payers' negotiate a lower price or disallow the RfP Invoice. The Payee has to record the decreasing revenue. Record all decreased invoices (see [Sheet 20]) on our Dynamic Bank Reconciliation. 1. Identify and List the Transactions: Before you start recording the adjustments, identify and list all the FedNow, RTP transactions, or modified transactions that need to be subtracted or adjusted on your bank reconciliation. These could be transactions that were sent but not yet reflected in your bank statement or transactions that were modified after initial entry. 2. Create Journal Entries to Reflect the Adjustments: For each transaction that needs to be subtracted or adjusted, create journal entries in your General Ledger. The specific accounts and journal entries you use will depend on the nature of the transactions. Here's a general guideline: For Sent FedNow or RTP Transactions:
This entry reflects the removal of funds from your bank account and the reversal of any revenue or income initially recognized. For Modified Transactions: If you are modifying a transaction, you should create a journal entry to reverse the original entry and record the modified one. Here's a general guideline:
Then, create a new entry to record the modified transaction:
Ensure that the adjusted entries accurately reflect the changes made to the transactions. 3. Update Your Bank Reconciliation: When you perform your bank reconciliation, document these adjustments:
4. Reconcile Your Bank Statement: Reconcile your bank statement by comparing the adjusted bank balance on your reconciliation statement with the bank statement balance provided by your bank. Ensure that these two balances match. If they don't match, investigate and resolve any discrepancies. By recording adjustments for sent FedNow, RTP transactions, or modified transactions in your General Ledger and documenting them in your bank reconciliation statement, you ensure that your financial records accurately reflect the adjustments made. This reconciliation process helps verify the accuracy of your bank statement and ensures that it aligns with your General Ledger. - Disallowed / Negotiated RfPs of FedNow & RTP(see [Sheet 21])Recording disallowed or
negotiated decreased prices for Request for Payments
(RfPs) of FedNow and Real-time Payments (RTP)
transactions in the General Ledger during a bank
reconciliation process involves ensuring that your
financial records accurately reflect these adjustments. Record all decreased invoices (see [Sheet 21]) on our Dynamic Bank Reconciliation.
a. Debit Entry:
b. Credit Entry:
Remember that the specific accounts and journal entries may vary depending on your organization's accounting practices and the nature of the RfPs of FedNow and RTP transactions. It's crucial to follow your company's accounting policies and procedures and consult with your finance or accounting department for guidance when making these adjustments. Additionally, involving your organization's auditors or accountants may be necessary to ensure compliance and accuracy. - Debit ACH Transactions & NSF Returned Checks(see [Sheet 22])Recording subtractions for Debit Automated Clearing House (ACH) transactions and NSF (Non-Sufficient Funds) returned check transactions on your bank reconciliation per the General Ledger is crucial for maintaining accurate financial records. Here's how to record these adjustments: 1. Identify and List the Transactions: Before you start recording the adjustments, identify and list all the Debit ACH transactions and NSF returned check transactions that need to be subtracted on your bank reconciliation. These could be transactions that were processed but not yet reflected in your bank statement or transactions that were reversed due to insufficient funds. 2. Create Journal Entries to Reflect the Adjustments: For each transaction that needs to be subtracted, create journal entries in your General Ledger. The specific accounts and journal entries you use will depend on the nature of the transactions. Here's a general guideline: For Debit ACH Transactions: This entry reflects the removal of funds from your bank account and the reversal of the debit ACH transaction. For NSF Returned Checks Transactions: When a check is returned due to insufficient funds, you'll typically reverse the initial deposit entry and record any associated fees. Here's a general guideline: This entry reflects the reversal of the initial deposit, the recording of NSF fees, and the reversal of any income or revenue initially recognized. 3. Update Your Bank Reconciliation: When you perform your bank reconciliation, document these adjustments: 4. Reconcile Your Bank Statement: Reconcile your bank statement by comparing the adjusted bank balance on your reconciliation statement with the bank statement balance provided by your bank. Ensure that these two balances match. If they don't match, investigate and resolve any discrepancies. By recording adjustments for Debit ACH transactions and NSF returned checks transactions in your General Ledger and documenting them in your bank reconciliation statement, you ensure that your financial records accurately reflect the adjustments made. This reconciliation process helps verify the accuracy of your bank statement and ensures that it aligns with your General Ledger. - Merchant Services & Bank Fees & NSF Charges(see [Sheet 23])Recording subtractions for merchant services fees, bank fees, and NSF (Non-Sufficient Funds) charges on your bank reconciliation per the General Ledger is essential for maintaining accurate financial records.
Here's a general guideline: For Merchant Services Fees:
- ATM & Debit Card Transactions(see [Sheet 24])Recording subtractions for ATM (Automated Teller Machine) transactions on your bank reconciliation per the General Ledger is important to ensure that your financial records are accurate and up to date. Here's how to record these adjustments: 1. Identify and List the ATM & Debit Card Transactions: Before you start recording the adjustments, identify and list all the ATM transactions that need to be subtracted on your bank reconciliation. These could include ATM withdrawals, ATM fees, or any other ATM-related transactions that have not yet been reflected in your bank statement. 2. Create Journal Entries to Reflect the Adjustments: For each ATM transaction that needs to be subtracted, create journal entries in your General Ledger. The specific accounts and journal entries you use will depend on the nature of the transactions. Here's a general guideline: For ATM Withdrawals: This entry reflects the decrease in your bank account due to the ATM withdrawal and the corresponding increase in cash. For ATM Fees: This entry reflects the expense incurred from ATM fees and the decrease in your bank account. 3. Update Your Bank Reconciliation: When you perform your bank reconciliation, document these adjustments: 4. Reconcile Your Bank Statement: Reconcile your bank statement by comparing the adjusted bank balance on your reconciliation statement with the bank statement balance provided by your bank. Ensure that these two balances match. If they don't match, investigate and resolve any discrepancies. By recording adjustments for ATM & Debit Card Transactions in your General Ledger and documenting them in your bank reconciliation statement, you ensure that your financial records accurately reflect the adjustments made. This reconciliation process helps verify the accuracy of your bank statement and ensures that it aligns with your General Ledger. - As Payer RFP/Auto/Recurring Direct Payments & Loans(see [Sheet 25])When a payer sends funds via a Request for Payment (RFP) digital invoice, the General Ledger should reflect the financial transactions associated with this process. Here's how you can show the General Ledger entries for this scenario: Assumptions: Step 1: Create a Chart of Accounts Ensure you have a well-structured Chart of Accounts that includes the necessary accounts for this transaction. Common accounts include: Step 2: Record the RFP Digital Invoice Step 3: Payment of the RFP Digital Invoice When Company ABC sends funds to pay the RFP digital invoice: Step 4: Record the Expense (Goods/Services Purchased) Once the RFP digital invoice is paid, you need to record the expense associated with the purchase of goods or services: Step 5: Reconciliation After recording these entries, regularly reconcile your bank statement with your General Ledger to ensure they match. This reconciliation process helps identify any discrepancies or errors. Make sure to use the appropriate accounts and descriptions in your General Ledger to accurately represent the financial transactions related to the RFP digital invoice process. Accounting practices may vary among organizations, so consider consulting with your accountant or financial advisor for guidance specific to your company's needs and chart of accounts. Recording subtractions for auto/recurring direct payments and loan transactions on your bank reconciliation per the General Ledger is crucial to ensure that your financial records accurately reflect these deductions. Here's how to record these adjustments: 1. Identify and List the Transactions: Before you start recording the adjustments, identify and list all the auto/recurring direct payments and loan transactions that need to be subtracted on your bank reconciliation. These could include payments for utilities, subscriptions, loan repayments, or any other recurring deductions that have not yet been reflected in your bank statement. 2. Create Journal Entries to Reflect the Adjustments: For each type of transaction that needs to be subtracted, create journal entries in your General Ledger. The specific accounts and journal entries you use will depend on the nature of the transactions. Here's a general guideline: For Auto/Recurring Direct Payments:
This entry reflects the expense incurred due to the auto/recurring direct payment and the corresponding decrease in your bank account. For Loan Repayments:
This entry reflects the reduction in the loan balance due to the repayment and the corresponding decrease in your bank account. It also accounts for any interest expense associated with the loan repayment. 3. Update Your Bank Reconciliation: When you perform your bank reconciliation, document these adjustments:
4. Reconcile Your Bank Statement: Reconcile your bank statement by comparing the adjusted bank balance on your reconciliation statement with the bank statement balance provided by your bank. Ensure that these two balances match. If they don't match, investigate and resolve any discrepancies. By recording adjustments for auto/recurring direct payments and loan transactions in your General Ledger and documenting them in your bank reconciliation statement, you ensure that your financial records accurately reflect the deductions made. This reconciliation process helps verify the accuracy of your bank statement and ensures that it aligns with your General Ledger. - Fraudulent Transactions(see [Sheet 26])Recording subtractions for fraudulent transactions on your bank reconciliation per the General Ledger is essential to correct errors and ensure your financial records accurately reflect the unauthorized transactions. Here's how to record these adjustments: 1. Identify and Document the Fraudulent Transactions: Before you can record the adjustments, identify and document the fraudulent transactions that need to be subtracted from your bank reconciliation. These could be unauthorized withdrawals, unauthorized purchases, or any other fraudulent activity on your bank account. 2. Create Journal Entries to Reflect the Adjustments: For each fraudulent transaction, create journal entries in your General Ledger to correct the inaccuracies. The specific accounts and journal entries you use will depend on the nature of the transactions and how they were initially recorded. Here's a general guideline: To Correct an Unauthorized Withdrawal:
This entry reflects the increase in your bank account balance due to the correction of the unauthorized withdrawal and reverses the incorrect expense or liability initially recorded. To Correct Unauthorized Purchases:
This entry reflects the reversal of the unauthorized purchase expense and the increase in your bank account balance. 3. Update Your Bank Reconciliation: When you perform your bank reconciliation, document these adjustments:
4. Reconcile Your Bank Statement: Reconcile your bank statement by comparing the adjusted bank balance on your reconciliation statement with the bank statement balance provided by your bank. Ensure that these two balances match. If they don't match, investigate and resolve any discrepancies. By recording adjustments for fraudulent transactions in your General Ledger and documenting them in your bank reconciliation statement, you ensure that your financial records accurately reflect the corrections made. This reconciliation process helps verify the accuracy of your bank statement and ensures that it aligns with your General Ledger. Additionally, reporting the fraudulent transactions to your bank and relevant authorities is crucial for initiating investigations and potential recovery of funds. - Other / Company Errors(see [Sheet 27])Recording other or company errors in your bank reconciliation per the General Ledger involves correcting discrepancies that may have occurred due to mistakes in your company's accounting or banking processes. Here's how to record these transactions: 1. Identify and Document the Errors: First, you need to identify and document the nature of the errors that need correction. This could include errors such as double entries, mispostings, or other inaccuracies in your company's accounting records. 2. Create Journal Entries to Correct the Errors: For each error identified, create journal entries in your General Ledger to correct the inaccuracies. The specific accounts and journal entries you use will depend on the nature of the errors. Generally, you will need to make offsetting entries to reverse the incorrect entries and record the correct ones. Here's a general guideline: To Correct an Overstatement of an Account:
To Correct an Understatement of an Account:
The key is to make journal entries that reverse the incorrect transactions and record the correct ones. Ensure that your corrected entries have the same value but the opposite effect as the incorrect entries. 3. Update Your Bank Reconciliation: When you perform your bank reconciliation, document these adjustments:
4. Reconcile Your Bank Statement: Reconcile your bank statement by comparing the adjusted bank balance on your reconciliation statement with the bank statement balance provided by your bank. Ensure that these two balances match. If they don't match, investigate and resolve any discrepancies. By recording wire transfer transactions in your General Ledger and documenting them in your bank reconciliation statement, you ensure that your bank statement accurately reflects the wire transfers received. This reconciliation process is essential for verifying the accuracy of your financial records and ensuring that your bank statement aligns with your General Ledger. - Adjusting Journal Entry (AJE's)(see [Sheet 28])Recording adjustments on a
bank reconciliation per the General Ledger using
Adjusting Journal Entries (AJEs) with debits or credits
is a standard practice to ensure that your financial
records align with your bank statement. With FedNow & RTP monitor outstanding 1) Full-Paid Invoice 2) Partial with installments and 3) Modify Reqeust for Payment Invoice Amount with diminish with an AJE to decrease Sales and A/R. (see [Sheet 28]) .
1. Prepare Your Bank Reconciliation: Start by preparing your bank reconciliation statement. This statement should include:
2. Identify the Adjustments: Review the bank reconciliation to identify any adjustments that need to be made. These adjustments typically fall into two categories:
3. Create Adjusting Journal Entries (AJEs): For each adjustment identified, create an AJE in your General Ledger. The type of entry (debit or credit) will depend on the nature of the adjustment:
Here are examples of AJEs for common bank reconciliation adjustments: For Deposits in Transit (Addition):
For Outstanding Checks (Subtraction):
For Bank Fees (Subtraction):
4. Update Your Bank Reconciliation: List the AJEs on your bank reconciliation statement under the respective categories (additions or subtractions). Include a clear explanation for each adjustment, its reason, and the adjusted amounts. 5. Reconcile Your Bank Statement: After incorporating the AJEs, recalculate the reconciled bank balance on your reconciliation statement. This should now match the bank statement balance. 6. Review and Verification: Double-check that all adjustments have been made correctly, and there are no discrepancies between your General Ledger and the bank statement. By using AJEs with debits or credits to adjust your General Ledger during the bank reconciliation process, you ensure that your financial records accurately reflect the reconciled bank balance. This process helps verify the accuracy of your bank statement and ensures that it aligns with your General Ledger. |
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