Checking account reconciliation and what to adjust each month
The business checking account carries most of a company's money movement, so its reconciliation catches most of the errors. The trick is knowing which differences to tick, which to leave open and which to record.
Every difference falls into one of three groups
Timing items, leave them open
Checks you wrote that have not cleared and deposits you made at the end of the month that the bank posts next month. Your books are right, the bank just has not caught up. List them on the bank side and carry them to next month.
Items only the bank knows about, record them
Monthly service charges, wire and overdraft fees, interest earned, automatic loan or card payments and returned customer checks. The bank is right and your books are missing something. Record an entry for each.
Errors, correct them where they happened
Transposed digits, duplicated entries, entries posted to the wrong account or a bank error. Correct book errors with an entry. Report bank errors to the bank and list them on the bank side until the bank fixes them.
What to tick
Tick an item only when the same transaction appears on the statement and in the books with the same amount. The date may differ by a few days. For deposits, one bank line can match several receipts in your books when your customers' payments were deposited together, and card processor settlements usually arrive as one net amount per day.
Typical adjusting entries for a checking account
| Item | Debit | Credit |
|---|---|---|
| Monthly service charge | Bank service charges | Cash |
| Interest earned | Cash | Interest income |
| Returned customer check | Accounts receivable | Cash |
| Automatic loan payment not recorded | Loan payable and interest expense | Cash |
| Payment entered twice | Cash | Accounts payable or the expense account |
Mistakes that keep differences coming back
- Recording outstanding checks as entries, which doubles them
- Writing off a small difference every month instead of finding it
- Reconciling to the bank feed instead of the statement, so a missed day goes unnoticed
- Mixing transfers between your own accounts with real payments
Reconcile the checking account in minutes
BankReconciler sorts every line into these three groups for you. Timing items land in Unmatched in books, bank only items in Unmatched in bank with a suggested entry, and duplicates in their own tab. Try it with your statement on the reconcile bank statement page, or follow the monthly bank reconciliation checklist.