Complete Bank Reconciliation Process
Bank Reconciliation Process is a eight step process starting from uploading the Bank Statement to finally posting the entries in General Ledger. Learn the Eight Steps in Detail!
Bank Reconciliation Process
Step 1 is to Upload the Bank Statement
Modern cash management systems provide for matching transactions from bank statements both automatically as well as manually.
The bank statement can be either uploaded manually or in an automated way if available in the desired electronic formats. The bank statements entered are per bank account number and are identifiable by a unique number and statement date provided by the user.
In the header data, Bank statement opening balances and closing balances are provided before creating the bank statement that acts as a control check to ensure all transactions have been uploaded properly.
For the process of automatic bank reconciliation, generally the system requires electronic bank statement in a pre-defined format only.
Step 2 is to Reconcile with Bank Statement using Automated Clearing
Where Bank statement details are automatically matched and reconciled with system transactions.
This method is ideally suited for bank accounts that have a high volume of transactions.
Step 3 is the Manual Clearing
You use the manual reconciliation method to reconcile any bank statement details that could not be reconciled automatically.
Step 4 is to Review & Summarize
Once the reconciliation process, is complete a review of reconciliation results must be carried out. Generate various reports to support this process of review.
Step 5 is to generate Unreconciled Report
Generate a report with list of all un-reconciled entries, for further decision making and matching.
Step 6 is to Match Unreconciled Entries
Unmatched entries as reported by unreconciled report are to be investigated and matched manually. Open items in clearing account will be cleared to respective customer / vendor account after getting information from bank/ other sources.
The entries that still remain unmatched should to be manually transferred to "Unreconciled Account".
Step 7 is to Transfer to General Ledger
After the reconciliation process, the accounting entries generated will be passed to the general ledger. The receipt and payment entries will be transferred in to the actual Cash/Bank account in the General Ledger when posted.
Step 8 is to Post Entries in General Ledger
Once transferred to General Ledger, the next step is to makes the postings to the bank account, bank clearing account along with the payment clearing. The posting can be done for each journal or for the batch.
Related Links
You May Also Like
-
In the previous article we talked about the meaning of the account reconciliations. Now as you now the definition of account reconciliation, in this article let us see why it is carried out.
-
Account Reconciliation – How? Learn the three key attributes to perfom account reconciliation.
-
In automated clearing, Bank statement details are automatically matched and reconciled with system transactions. Learn how this process works and what are the perquisites to enable the same.
-
The objective of Financial risk management is to protect assets and cash flows from any risk. Treasury function works to accurately assess financial risks by identifying financial exposures including foreign exchange, interest rate, credit, commodity and other enterprise risks. Learn about the various risks that are managed by treasury.
-
Before we dive into cash management, let us fist understand what we mean by cash and what constitutes cash in context of cash management process.
-
Cash Clearing – Accounting Entries
The Cash Clearing process enables you to track amounts that have actually cleared your bank. Learn the steps and accounting entries that gets generated during the cash clearing process.
-
Treasury Management - Benefits
Effectively using treasury management with cash management and trade finance products brings tangible benefits to both corporates and financial institutions. Let us discuss some tangible benefits of treasury function.
-
Bank Reconciliation is a PROCESS to Validate the bank balance in the general ledger With Bank Statement. Learn the bank recon process.
-
The terms Treasury Management and Cash Management are sometimes used interchangeably, while, in fact, the scope of treasury management is larger and includes funding and investment activities as well. Learn all about Treasury Management here!
