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Doing The Bank Reconciliation 2017-06-08T15:59:00+00:00
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Doing the bank reconciliation

 

Having done both the preparatory work and the ticking (see Preparing to do a Bank Reconciliation with Big Red Cloud Accounting Software), your bank account records should be completely up-to-date.  The bank balance in your records is termed the Actual or True Bank Balance since it is now more accurate than the statement balance. Any difference between the bank balance according to your records and the statement balance can now only be due to outstanding items.  The bank reconciliation process itself simply consists of taking the statement balance, adding the total of outstanding items (i.e. unticked items) and seeing if the result is the same as the Actual Bank Balance.

To Do A Bank Reconciliation:

Select the Bank Account to Reconcile in Lookup / Bank Accounts, Setup – Bank Accounts  and click on the Reconcile button or select via Reports / Bank Accounts / Bank Reconciliation in the accounting software.

 

Important Note:

If you have been ticking off items from bank statements it is generally not possible to re-do a bank reconciliation for an earlier period.  This is because all items for that period will have subsequently cleared through the bank and have been ticked, thus making it impossible to calculate the outstanding items total for that period.

Include Entries Up To.

This will default to the current month.  Select a different month as required.

Bank Statement Date.

The date of the last calendar day in the month selected is displayed.  Change to the actual Bank Statement Date if different.

Bank Statement Balance (Minus if Overdrawn).

Enter the balance on the bank statement.

Total Of Outstanding Entries.

This is the total amount of entries in the Bank Ledger which have not been ‘ticked’ as being on a Bank Statement.

Actual Bank Balance.

On entering the Bank Statement Balance the Total of Outstanding Entries is deducted to give the Actual Bank Balance.  The difference between this and the Bank Ledger balance in Big Red Cloud is reported as a Discrepancy.

***  Discrepancy ***

This is the difference between the balance expected on your statement and the actual statement balance.  It is normal for some value to appear here when your Big Red Cloud entries and your entries on your Bank Statement are fully reconciled the amount of Discrepancy will be zero.

The most likely causes of discrepancies are:

  • Items appearing on the bank statement which have not been entered into the Cash Payments or Bank Payments Books, for example bank charges.
  • Items which appear on the bank statement but which have not been ticked.
  • Items which have been ticked (in error) even though they have not yet appeared on a bank statement.
  • Discrepancies between the amounts for items on the bank statement and the amounts for the same items as shown in your records, e.g. due to an error in the amount recorded on a lodgement slip etc.
  • An inaccuracy in the bank’s opening balance, e.g. if the bank account had been set up with an unreconciled opening balance.  This would only be a problem for first-time reconciliations.

Please Note:  All discrepancies, however small, should be corrected.

Bank Reconciliation Report.

When your Bank Account is fully reconciled you should print the Bank Reconciliation Report.  This contains all the details that appear on the screen with a list of all outstanding items.  It is recommended that you file this report with your bank statement.

First Bank Reconciliation.

For the very first bank reconciliation, it is likely that there will be a few entries outstanding from the previous financial year which are not recorded in Big Red Cloud.  As these will be incorporated in the bank account’s reconciled opening balance and therefore seen as being cleared, they will cause a discrepancy.  These entries should be kept on a separate list and ticked by hand as they clear; the discrepancy in the Big Red Cloud ® will reduce accordingly.

Note the following:

  • The Balance figure, near the bottom-right, represents the bank balance according to your records.  It is calculated as the opening balance, plus all lodgements entered, minus all cheques etc. entered.
  • Displayed in the middle of the screen is the list, in date order, of all transactions you have entered which affect this bank account.  Each item that features on the bank statement should also appear on this list.

You should now take each item in turn from the bank statement and find it on the list on the screen.  You can scroll through the list using the arrow, Page Up and Page Down keys.  When you have found the item on the screen you should check that its debit/credit amount is the same as it is on the bank statement.  You can then ‘tick’ it on the screen to indicate that it has cleared through the bank.  You highlight the line and then either pressing the space-bar on the keyboard or double-click on it.  As you do this the amount will be removed from the column headed O/Standing and a ‘tick’  will appear in the rightmost column on the screen.

Note: To avoid overlooking items on the bank statement you should, as you tick items on the screen, also tick them on the statement itself.

Note: The Outstanding figure, underneath Balance near the bottom-right, represents the total of all unticked items.  This figure changes as you tick items.  However, the Balance figure does not change as you tick.  This is because whether or not an item has cleared through the bank does not

affect what the balance is according to your records; only entering details of lodgements or cheques etc. can do that.

All Items Or Outstanding Only.

When you look up the Bank Ledger the list displayed will contain all the bank entries you have created since the beginning of the Financial Year as well as any items from previous years that were not reconciled before the year-end.  All the previously ticked items will be displayed as well as those those still outstanding.  To avoid looking at all items you can click on the ‘Outstanding Only’ button to display only unticked items.  Only items ‘unticked’ at the start of the session will be displayed.

Note the following:

  • The Balance figure, near the bottom-right, represents the bank balance according to your records.  It is calculated as the opening balance, plus all lodgements entered, minus all cheques etc. entered.
  • Displayed in the middle of the screen is the list, in date order, of all transactions you have entered which affect this bank account.  Each item that features on the bank statement should also appear on this list.

You should now take each item in turn from the bank statement and find it on the list on the screen.  You can scroll through the list using the arrow, Page Up and Page Down keys.  When you have found the item on the screen you should check that its debit/credit amount is the same as it is on the bank statement.  You can then ‘tick’ it on the screen to indicate that it has cleared through the bank.  You highlight the line and then either pressing the space-bar on the keyboard or double-click on it.  As you do this the amount will be removed from the column headed O/Standing and a ‘tick’  will appear in the rightmost column on the screen.

Note: To avoid overlooking items on the bank statement you should, as you tick items on the screen, also tick them on the statement itself.

Note: The Outstanding figure, underneath Balance near the bottom-right, represents the total of all unticked items.  This figure changes as you tick items.  However, the Balance figure does not change as you tick.  This is because whether or not an item has cleared through the bank does not

affect what the balance is according to your records; only entering details of lodgements or cheques etc. can do that.

All Items Or Outstanding Only.

When you look up the Bank Ledger the list displayed will contain all the bank entries you have created since the beginning of the Financial Year as well as any items from previous years that were not reconciled before the year-end.  All the previously ticked items will be displayed as well as those those still outstanding.  To avoid looking at all items you can click on the ‘Outstanding Only’ button to display only unticked items.  Only items ‘unticked’ at the start of the session will be displayed.