Learn How to Reconcile Accounts for FREE!
This page contains our free online reconciliation course. It will teach you the basics of how to reconcile accounts, including how to reconcile a bank account.
The Course Covers:
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The basics of reconciliations
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Bank reconciliations
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Reconciliation examples
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And more
Course Modules:
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Lesson 1: Reconciliation Basics
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Lesson 2: How to do a Basic Reconciliation
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Lesson 3: How to do a Bank Reconciliation
To start my free reconciliation course, scroll down.
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This course is FREE, and no registration is required!
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Jump to:
FREE Online Accounting Reconciliation Course
Part 1: Reconciliation Basics
Module overview:
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Course Overview
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What is reconciling in accounting
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Why are reconciliations needed
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Reconciliation basics
What is a reconciliation?
In accounting, a reconciliation compares an entity's accounting records against a financial document, such as a bank statement.
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A reconciliation includes reviewing transactions, adding missing transactions, and removing accounting errors, such as duplicate entries.
Why are reconciliations needed?
Accounting reconciliations help the financial accounts to be reliable and accurate. They are a safety net. Without reconciliations, financial accounts are more vulnerable to errors. Reconciliations must be done to produce accurate financial statements.
Which accounts can be reconciled?
If a statement can be obtained, an account can be reconciled. A statement usually includes opening and closing balances, payments, charges, and other items which impact balances. For example, a bank statement includes opening and closing balances for a period and money in and out of the account. A statement from a supplier should detail an opening and closing balance, invoices, credit notes, payments to the account, and refunds.
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The following accounts can be reconciled:
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Bank accounts, including current, checking, and savings accounts
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Credit and charge card accounts
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Loan and mortgage accounts
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Tax accounts, including corporation and sales tax accounts
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Supplier accounts
Reconciliation Example
For this example, I will be reconciling a loan account.
We will compare the loan accounting records in the financial accounts against a loan statement. The loan statement shows the account activity for the last six months, so we'll compare the accounting records against the loan statement for the same period.
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The loan statement shows the following for the period:
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An opening balance
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A closing balance
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Loan repayments
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Interest charged
We must compare the accounting records against all four to ensure the accounting records are accurate. If there are mistakes, these must be corrected. Common errors highlighted by doing a reconciliation are missing transactions and duplicate entries.
Loan Statement Example
Part 2: Reconciliation Example
Module overview:
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How to reconcile an account
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Reconciliation example
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The basics of reconciling accounts
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And more
Accounting Records Example
Reconciliation Example Continued
Review the above statements.
The loan statement details the entire loan account activity for a six-month period (1 Jan 20XX to 30 Jun 20XX).
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The statement from our accounting records displays what has been accounted in the same period.
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What do you notice? Are the accounting records complete? What is missing? Are there any errors?
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You should notice the following on the accounting records:
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The opening balances match. This is likely because a reconciliation was completed for the period prior, so the accounting records are up to date and accurate to 31 Dec 20VV.
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Repayment duplicate. The February repayment has been accounted for twice.
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Repayment missing. The March repayment has not been accounted for.
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Interest missing. The interest charge for quarter one has not been accounted for.
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Repayment error. The May repayment amount is wrong.
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The closing balance is not correct.
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Once the discrepancies have been identified, they are corrected. For example, the missing transactions can be accounted for, the duplicate transaction can be removed or reversed, and the incorrect payment amount can be amended. Once the corrections are done, the closing balances should match. Closing balances that match are a sign that the accounting records are complete. The reconciliation is done.
Part 3: Reconciling a Bank Account
Module overview:
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How to reconcile a bank account
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Bank reconciliation example
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Bank reconciliation basics
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And more
How to do a Bank Reconciliation
Completing a bank reconciliation is no different to completing any other reconciliation, such as the loan reconciliation above. However, current and checking accounts usually have more transactions than other accounts, such as loan, credit card, supplier, and tax accounts. Due to a larger volume of transactions, reconciling bank accounts can be more challenging and is usually done more often than other accounts.
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You'll need access to the company's accounting records and bank statements to do a bank reconciliation. Once you have these, the process is:
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Choose a period to reconcile. This is usually the period following the last reconciliation.
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Compare the accounting records for the period against the bank statements for the same period.
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Add missing transactions. These are transactions are shown on the bank statements but not the accounting records.
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Remove duplicate transactions. These are duplicate entries on the accounting records added by error.
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Amend incorrect transactions. These are often transactions with the wrong date or amount.
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Ensure the closing balances match. Once the process is complete, the closing balance on the accounting records should match the closing balance for the period on the statements.
Bank Reconciliation Examples
Watch an example of doing a bank reconciliation in my free How to do a Bank Reconciliation video.
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Alternatively, watch me reconcile a bank accounting on accounting software:
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How often should the Bank be Reconciled?
It depends on how many transactions are going through the bank account. However, the rule of thumb is, 'the more often, the better'. If you can reconcile the bank account every few days or once a week, this is best. Leaving a bank reconciliation to once a year can create a messy task.
Common Bank Reconciliation Problems - Trouble-shooter
Problem: The closing balance doesn't match
Solution: You must re-check all transactions, including the opening balance, and money in and out. Check for incorrect amounts, missing transactions, and duplicate entries.
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Problem: The opening balance doesn't match
Solution: The previous period hasn't been reconciled, or an error has been made after previous periods' reconciliations. You will need to investigate.
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Problem: Transactions are shown from previous periods
Solution: If all previous period reconciliations have been completed, then the transactions are likely errors. They were not used in prior reconciliations, so they were never reconciled, bringing them forward to the next reconciliation. You will need to investigate. ​​
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