The process of reconciling the bank accounts for your business refers to proving out cash — verifying that what you have in your business’s bank accounts actually matches what the bank thinks you have in those accounts.
Before you reconcile your accounts, it’s important to be sure that you’ve made all necessary adjustments to your books. When you make adjustments to your cash accounts, you identify and correct any cash transactions that may not have been properly entered into the books. You also make adjustments to reflect interest income or payments, bank fees, and credit-card chargebacks.
If you’ve done everything right, your accounting records should match the bank’s records when it comes to how much cash you have in your accounts. The day you close your books probably isn’t the same date as the bank sends its statements, so do your best at balancing the books internally without actually reconciling your checking account.
Correcting any problems during the process of proving out will minimize problems you may face reconciling the cash accounts when that bank statement actually does arrive.
You’ve probably reconciled your personal checking account at least a few times over the years, and you’ll be happy to hear that reconciling business accounts is a similar process. The following table shows one common format for reconciling your bank account:
| Transactions | Beginning Balance | Deposits | Disburse-ments | Ending Balance |
|---|---|---|---|---|
| Balance per bank statement | $ | $ | $ | $ |
| Deposits in transit (those not shown on statement) | $ | $ | ||
| Outstanding checks (checks that haven’t shown up yet) | ($) | ($) | ||
| Total | $ | $ | $ | $ |
| Balance per checkbook or Cash in Checking (which should be the same) | $ |