The reconciliation
Bank side: statement balance plus deposits in transit, less outstanding checks, plus or minus bank errors. Book side: ledger balance plus unrecorded receipts such as interest and collected notes, less unrecorded charges such as service fees and NSF items, plus or minus book errors. When both sides are complete the adjusted balances agree and the adjusted figure is the cash to report.
When to use it
Use it at month end and year end for every bank account, when preparing audit workpapers for cash, or when checking a client's reconciliation.
Limits
The tool adds the items you list. It does not decide whether an item is genuine. Stale items, unusual items near cutoff and items cleared slowly need inquiry and support. A reconciliation that balances can still hide a theft, so combine it with segregation of duties and the other cash tests.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
What is the bank reconciliation formula?
Adjusted bank balance = statement balance + deposits in transit − outstanding checks ± bank errors. Adjusted book balance = ledger balance + items the bank recorded that the books did not (interest, notes collected) − items such as bank charges and NSF checks ± book errors. The two adjusted balances should be equal.
Which items need a journal entry?
Items on the book side do: bank charges, NSF checks, interest earned, notes collected by the bank and book errors. Deposits in transit and outstanding checks are timing differences that clear on their own. Bank errors are corrected with the bank.
How do auditors test a bank reconciliation?
Common procedures are agreeing the statement balance to the bank confirmation, recomputing the reconciliation, tracing deposits in transit and outstanding checks to the next period's statement, and looking at the clearing dates of items near year end. A proof of cash extends this to receipts and disbursements.
What if the difference will not go to zero?
Look for a transposition, a reconciling item on the wrong side, a missed bank error, or a recorded transaction that the bank has not processed. The tool shows the remaining difference as bank less books.
Why do old outstanding checks matter?
Checks that stay outstanding a long time need an explanation for why they have not cleared, and the clearing dates of deposits and checks near year end show whether cash was recorded in the right period.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.