1. What Is Bank Reconciliation?

Bank reconciliation is the process of matching the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement. The goal is to identify and explain any differences between the two balances.

2. How Does the Calculator Work?

The calculator uses the bank reconciliation formula:

Where:

• Bank Statement — The ending cash balance reported by the bank
• Book Balance — The ending cash balance in the company's records
• Adjustments — Any reconciling items that explain the difference

Explanation: The formula calculates the difference between what the bank shows and what the company's books show, after accounting for known adjustments.

3. Importance of Bank Reconciliation

Details: Regular bank reconciliation helps detect errors, prevent fraud, identify bank fees, and catch unauthorized transactions. It's a critical internal control for cash management.

4. Using the Calculator

Tips: Enter the ending balance from your bank statement, the ending balance from your accounting records, and any known adjustments (deposits in transit, outstanding checks, bank fees, etc.).

5. Frequently Asked Questions (FAQ)

Q1: What are common reconciling items?
A: Common items include outstanding checks, deposits in transit, bank fees, interest earned, and errors in either the bank statement or company records.

Q2: How often should reconciliation be done?
A: Most businesses should reconcile their bank accounts at least monthly, though high-volume accounts may need weekly or even daily reconciliation.

Q3: What if the difference isn't zero after reconciliation?
A: A non-zero difference indicates either unidentified reconciling items or possible errors that need investigation.

Q4: What's the difference between bank and book balance?
A: The bank balance reflects transactions processed by the bank, while the book balance reflects transactions recorded in the company's accounting system.

Q5: Are there automated reconciliation tools?
A: Yes, many accounting software packages offer automated bank reconciliation features that import bank data and match transactions.