Bank Reconciliation Statement

Introduction

Bank Reconciliation Statement

A bank reconciliation statement is full-fledged comparative over view of banking and business transaction it reconciles an entity’s bank account with its financial records. The statement shows the deposits, withdrawals, and other activities of a bank account for a specific period. A bank reconciliation statement is used as financial internal control tool to mitigate any frauds possible.

Contents Of the post

• Introduction
• Purpose of Bank Reconciliation Statement in UAE
• Required Information for Bank Reconciliation Statement IN UAE
• Process for Bank Reconciliation Statement in UAE
• Guide to smooth preparation of Bank Reconciliation Statement
• Download Bank Reconciliation Template for UAE
• Features included in the Bank Reconciliation Template
• Reach Accountant Online VAT Accounting Software-Your Guide to Bank Reconciliation Statement for UAE
• Conclusion

Purpose of Bank Reconciliation Statement in UAE

Bank reconciliation statements  is the process used to ensure payments have been processed and cash collected have been Completing a bank reconciliation statement requires using both the current and the previous month’s statements, including the closing balance of the account. The accountant typically prepares the bank reconciliation statement using all transactions through the previous day, as transactions may still be occurring on the actual statement date. All deposits and withdrawals that have been posted to the account must be on hand to prepare the reconciliation statement.

Required Information for Bank Reconciliation Statement in UAE

Preparing a bank reconciliation statement mandates use of the current and the previous month’s statements, including the closing balance of the account. The bank reconciliation statement is prepared using all transactions of the previous day, as transactions may still be occurring on the actual statement date. All deposits and withdrawals posted to the account must be ready to prepare bank reconciliation statement.

Bank Reconciling Statement: Adjusting Balance per Bank

The statement is prepared by adjusting the ending balance of the bank statement to reflect outstanding cheques or withdrawals. These are transactions in which payment is not received but the cash has not yet been accepted by the recipient. An example is a cheque that has been mailed on October 30. When preparing the October 31 bank reconciliation statement, the cheque mailed the previous day is unlikely to have been cashed, so the  amount from the bank balance. There can be collected payments that have not yet been processed by the bank, which requires a positive adjustment.

Bank Reconciling Statement: Adjusting Balance per Books

The cash account balance in an entity’s financial records requires necessary adjustments as well. For instance, a bank may charge a fee for having the account open. The bank withdraws and processes the fees automatically from the bank account. Therefore, when preparing a bank reconciliation statement, any fees taken from the account must be accounted for by preparing a journal entry.

Another item that requires an adjustment is interest earned. Interest is automatically deposited into a bank account after a certain period of time. Thus, the accountant may need to prepare an entry that increases the cash currently shown in the financial records. After all adjustments are made to the books, the balance should equal the ending balance of the bank account. If the figures are equal, a successful bank reconciliation statement has been prepared.

Process for Bank Reconciliation Statement in UAE

1. Every month end, entity will receive a bank statement from the bank, which itemizes all depositsmade into your  account, as well as all cheques that cleared the bank, and a other charges against the account, such as for account servicing fees. There should be a reconciliation form on the back of this statement, which you can use to complete reconciliation. If it is easier, use your own reconciliation form.
2. Tally each of the deposits in your records to those noted on the bank statement. If you have recorded a deposit that the bank had not yet received during the month, list this deposit as a reconciling itemthat should be added to the bank’s ending cash balance for your account.
3. Compare the amount of each deposit recorded by the bank to the amount that you recorded. It is possible that the bank rejected a cheque within a batch of deposited checks, or recorded the amount of a check differently. The amount of a rejected check should be added to the bank’s ending cash balance.
4. If there is a difference in the amount of a cheque recorded by the bank, you may have made an error in your accounting records. If so, adjust your record of the deposit. If the bank made an error, contact the bank with this information, and include the difference as a reconciling item.
5. Match all checque listed in the bank statement as having cleared the bank to those listed in your cheque register. Put a mark next to each cheque in your cheque register that matches the checks listed on the bank statement. Also compare the amounts of the cheques; if there is a difference between the amount recorded by the bank and your own records, either adjust your records or contact the bank regarding the difference.
6. Make a list of all checques in your register that have not yet cleared the bank. The total of these uncleared checques is a reconciling item that is a deduction from the bank’s ending cash balance for your account.
7. Go through the miscellaneous account debits and credits listed on the bank statement, and verify that you have recorded them in your own records. It is quite possible that none of these items have been listed, so be sure to adjust your cash balance for these items before proceeding. Examples of miscellaneous items are fees for bounced cheques, overdraftcharges, account maintenance fees, and charges for additional check stock ordered by you.
8. Add or subtract all reconciling items from the bank’s ending cash balance for your account, and compare the result to your own record of the ending cash balance. If the two numbers do not match, it is possible that the beginning balances of these two numbers also did not match, in which case you should reconcile the bank statement for the preceding period. Otherwise, there is still a reconciling item within the current period that you have not yet identified.
9. Once the reconciliation is complete, staple your list of all reconciling items to the bank statement or write these items onto the reconciliation form appearing on the back of the bank statement. Store this information, so that you can reference it in the future.

Guide to smooth preparation of Bank Reconciliation Statement

• Timely Reconciliations– In order for a bank reconciliation to be most effective, it should be done shortly after month-end  one every month. There are several factors that will dictate the definition of timely; however, a good rule of thumb is mid-month. One to two full months after the fact is simply not acceptable, having such a loose control is significantly increasing your cash balance to error and fraud.
• Segregation of Duties– When it comes to bank reconciliations, it really doesn’t matter how big or small your accounting department is – there should be some level of duty segregation. At the minimum, if you have one accountant, the owner should be reviewing the reconciliation every month; yes, they are that important.
• Two Column Approach– Because there are so few items that can impact the bank balance (deposits in transit, checks that have been issued but have not cleared, and bank errors), we like the idea of coming to an adjusted bank balance first. Once you have the adjusted bank balance, the general ledger can be reconciled (i.e., adjusted) to that same balance.
• Document–Notes should be taken that will help solidify that paper trail and significantly reduce research time when questions arise at a later date.  This bank reconciliation template has a section for a unique note for each reconciliation item. Additionally, there is a location for the entry to be documented along with the reconciliation, which should help with the review process.
• Accountability– The Prepared By and Reviewed By lines should have a manual signature, same with the dates.

Download Bank Reconciliation Template for UAE

Features included in the Bank Reconciliation Template

This bank reconciliation template includes the following features designed to increase efficiency and enhance professionalism:

• Dynamic formulas utilizing the offset function
• Example data so you can see how the template works (it’s on it’s own tab)
• Conditional formatting for data entry – notice at the top of the picture above, the pink highlights, this is data that needs to be completed. Also, if the reconciliation doesn’t balance, it will turn red and show you the difference.
• Set up to print on a single page; print settings may need to be adjusted if data is added

Reach Accountant Online VAT Accounting Software-Your Guide to Bank Reconciliation Statement for UAE

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Conclusion

Bank Reconciliation Statement is one of the steps to ensure business is meeting its necessary objectives. Reach can prove to be the best companion in the way of achieving business goals. Reach Online VAT Accounting Software is FTA approved  user friendly having all the features for running entire business organization by just a click away.