Perform a Weekly Bank Reconciliation

by Greg DePersio

1 min read

Preventative accounting measures are an effective way to detect errors before a material misstatement occurs. A bank reconciliation compares the amount of cash recorded on the financial statements to the amount of cash recorded by the bank. Although there will likely be differences between the bank balance and the balance per books, this is most often due to timing issues, and a bank reconciliation is a strong piece of an internal control system. A bank reconciliation should be performed periodically and is most frequently completed at the end of the month. The balance per books is adjusted for bank activity. This is done by posting journal entries. The bank balance is adjusted for deposits in transit, outstanding checks, and banking errors. After both records are adjusted, the two figures should reconcile. If they do not, a banking discrepancy exists that warrants investigation. Bank reconciliations should be incorporated into small businesses that have numerous cash transactions. The bank reconciliation is intended to detect fraud that may occur from any single employee. Although a bank reconciliation is unable to detect fraud due to collusion, it should still be incorporated to detect banking errors. For instance, a bank may have deposited a check into an incorrect bank account. Without confirming the amount that should be in the bank account, a small business would never detect the error.

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