Home > Financial Accounting, OpenERP > Step by Step Bank Reconciliation

Step by Step Bank Reconciliation

I have an example of small bank reconciliation process example. In this example first I will show the cash in bank ledger having its opening and closing balance for the month of july 2005 of Salman & sons. Second I will show the bank statement (that represent the customer ledger in bank) of the month of july 2005.

Salman & Sons

Bank Book, july 2005

Vno Date Particulars Dr. Cr.
1 Balance B/F 10000
1 3 Dawood & Co 2500
2 5 Bill Receivable Discount 11900
3 9 Naeem 1000
4 10 Rizwan & Co 400
5 16 Saleem & Co 1500
6 20 Crown & Co 1800
7 21 Asif 2000
8 24 Rafiq & Sons 4000
9 27 Cash 1200
10 28 Cash 600
11 30 Ahmad 5500
12 31 Naseem & Co 3000
31 Balance B/F 18000
Total 31700 31700

Table 1 (Entries Without Reconcile with Bank Statement)

Salman & Sons

Bank Statement, july 2005

Bank-Reff No Date Particulars Withdrawals Deposits Balance
1 Balance B/F 10000 10000
1 4 Dawood & Co 2500 7500
2 5 Bill Discount 11900 19400
3 12 Rizwan & Co 400 19800
4 13 Naeem 1000 18800
5 17 Saleem & Co 1500 17300
6 27 Self 1200 16100
7 28 Cash 600 16700
8 29 B/R Dishonored 12000 4700
9 30 Rehman & Sons 1100 5800
10 30 Interest on NIT Units 300 6100
11 31 Crown & Co 1800 7900
31 Bank Charges 100 7800

Table 2 (Entries Without Reconcile with Bank Book)

Causes of Difference;

Opening Balance of both statements is same but the closing balance is not same. There some items that frequently causes a difference. Some of these are

  • Cheques issued but not yet presented for payment
  • Cheques deposited but not yet collected
  • Bank charges not entered in the bank book
  • Interest credited by bank not entered in the Bank Book
  • Amount directly deposited into bank be debtors.
  • Credit transfer
  • Standing order
  • Direct Debit

Now Reconcile each entry means match each entry of bank book in bank statement and assign the respected unique number and same inverse exercise from bank statement to bank. Following are the same information but with reconciliation.

Salman & Sons

Bank Book, july 2005

Vno Date Particulars Dr. Cr. Reconcile
1 Balance B/F 10000
1 3 Dawood & Co 2500 1
2 5 Bill Receivable Discount 11900 2
3 9 Naeem 1000 1
4 10 Rizwan & Co 400 3
5 16 Saleem & Co 1500 5
6 20 Crown & Co 1800 11
7 21 Asif 2000
8 24 Rafiq & Sons 4000
9 27 Cash 1200 6
10 28 Cash 600 7
11 30 Ahmad 5500
12 31 Naseem & Co 3000
31 Balance B/F 18000
Total 31700 31700

Table 3 (Entries reconcile with bank statement)

Salman & Sons

Bank Statement, july 2005

B-Reff No Date Particulars Withdrawals Deposits Balance Reconcile
1 Balance B/F 10000 10000
1 4 Dawood & Co 2500 7500 1
2 5 Bill Discount 11900 19400 2
3 12 Rizwan & Co 400 19800 4
4 13 Naeem 1000 18800 3
5 17 Saleem & Co 1500 17300 5
6 27 Self 1200 16100 9
7 28 Cash 600 16700 10
8 29 B/R Dishonored 12000 4700
9 30 Rehman & Sons 1100 5800
10 30 Interest on NIT Units 300 6100
11 31 Crown & Co 1800 7900 6
31 Bank Charges 100 7800

Table 4 (Entries reconcile with bank book)

Un-reconcile items:

Un reconcile entries are those item that cause the balance different.. In above example we have some un-reconcile entries. These un-reconcile entries are farther used to prepare reconciliation Statement. These un-reconcile entries are;

1 Debit side of Bank Book
Two cheques have not been Collected
Rafiq & Sons 4000
Naseem & Co 3000
2 Credit Side of Bank Book
Two cheques have not been Presented
Asif 2000
Ahmad 5500
3 Debit side of Bank Statement
Two Amounts are not recorded in Bank Book
Dishonored Bills Receivable 12000
Bank Charges 100
4 Credit Side of Bank Statement
Two Amounts are not recorded in Bank Book
Rehman & Sons 1100
Interest on NIT Units 300

Format of Bank Reconciliation Report:

Below is the format of bank reconciliation report with explanation of what to do with these un-reconcile entries.

Bank Reconciliation Statement as on 31-07-2005

Rs. Rs.
Bank Balance as per Bank Book (Dr.) xxx
Add: Those items which increse the bank statement balance more than bank book
a Cheques Issued but not presented xxx
b Intereset credited by bank not entered in the cash book xxx
c Cash directly deposited into the bank but not recoreded in bank book xxx
e etc xxx xxx
xxx
Deduct: Those items which decrease the bank statement balance then bank book
a Cheques deposited but not credited by the bank xxx
b Bank charges not recorded in the bank book xxx
c Direct payment by bank as per standing order not recorded in bank book xxx
e etc xxx xxx
Bank Balance as per Bank statement (Cr.) xxx
Table 6 (Format of bank reconciliation)

Bank Reconciliation Statement of above example:

Bank Reconciliation Statement as on 31-07-2005

Rs. Rs.
Bank Balance as per Bank Book (Dr.) 18000
Add:
1 Two cheques have not been Presented
Asif 2000
Ahmad 5500 7500
2 Two Amounts are not recorded in Bank Book
Rehman & Sons 1100
Interest on NIT Units 300 1400
Dr Balance 26900
Deduct:
1 Two cheques have not been Collected
Rafiq & Sons 4000
Naseem & Co 3000 7000
2 Two Amounts are not recorded in Bank Book
Dishonored Bills Receivable 12000
Bank Charges 100 12100
Cr Balance 19100
Bank Balance as per Bank statement (Cr.) 7800

Table 7 (Bank reconciliation statement of above example)

  1. September 10, 2010 at 3:15 pm

    A very nice and systematic approach towards preparing a Bank Reconciliation Statement. Your ths effort will definitely help any one to easily understand the bank processes, especially for non-commercial persons.

  2. myasinr
    September 11, 2010 at 8:12 pm

    Thanks dear, pray so that i can contribute more

  3. September 16, 2010 at 10:01 am

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    Katty Meetington

  4. September 26, 2010 at 12:59 pm

    I like this blog very much. Such informative sites and blogs must be there for others to know about these typical topics.

  5. Whitny Pingtown
    November 19, 2010 at 7:21 am

    Wow, certainly nice topic. Where will I find that subscription?

    Whitny Pingtown
    rf sweep

    • November 19, 2010 at 8:55 pm

      @Whitny thanks
      if u talking abt subscription of blogs posts updates, than u can find at right toolbar column of this blog

  6. September 15, 2011 at 8:37 am

    Any possibility of carrying out this in openerp v6? Btw, nice break down.

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