A bank reconciliation template with working formulas: enter the bank balance in your books, the balance on the bank statement and the items behind the difference. Each balance is adjusted by its own items until they agree, and the adjusting entries to record in your books appear alongside. Download the statement in Excel to keep working or as a PDF to sign.
In the example the books show SAR 51,112.50 and the bank statement SAR 52,910.00, a difference of SAR 1,797.50. After outstanding cheques, a deposit in transit, bank charges, a customer transfer, a returned cheque and a recording error, both sides reach SAR 52,434.50.
What bank reconciliation is and why it is done monthly
Bank reconciliation compares the bank balance in the company's books with the balance on the bank statement on the same date and explains every riyal of the difference. The bank reconciliation statement is the working paper that records that explanation. Doing it every month catches unrecorded charges, returned cheques and keying errors before they pile up, and shows any withdrawal the company did not authorise. In the example the statement is SAR 1,797.50 higher than the books, and the gap is not accepted until its source is known.
How to prepare a bank reconciliation statement
- Enter the balance per books and the balance per bank statement on the last day of the month: SAR 51,112.50 and SAR 52,910.00 in the example.
- Match the statement against your books line by line, or enter both in the Transaction matching tab to highlight what does not match.
- Add each unmatched item and choose its type; the side that is adjusted and the sign are worked out for you.
- Bank side: 52,910.00 − 3,200.00 − 1,875.50 (two outstanding cheques) + 4,600.00 (deposit in transit) = SAR 52,434.50.
- Book side: 51,112.50 − 115.00 − 23.00 (charges) + 2,750.00 (customer transfer) − 1,200.00 (returned cheque) − 90.00 (recording error) = SAR 52,434.50. When the difference after reconciliation is zero, download the statement and sign it.
Why the bank balance differs from the books
| Item | Adjusts | Effect |
|---|---|---|
| Outstanding cheque | Bank | Deduct |
| Deposit in transit | Bank | Add |
| Bank charges and fees | Books | Deduct, and needs an entry |
| Direct credit or bank collection | Books | Add, and needs an entry |
| Returned cheque | Books | Deduct, and charge the amount back to the customer |
| Error in the books or by the bank | The side with the error | By the sign of the correction: positive adds, negative deducts |
Only book-side items are journalised, because the bank has recorded them and the company has not. In the example: the charges, Dr Bank charges / Cr Bank; the customer transfer of SAR 2,750.00, Dr Bank / Cr Customers; the returned cheque of SAR 1,200.00, Dr Customers / Cr Bank; and the SAR 90.00 difference on cheque 1039, Dr the account it was recorded in / Cr Bank.
Common bank reconciliation mistakes
- Adjusting the book balance for outstanding cheques, which belong to the bank side.
- Taking the two balances on different dates.
- Leaving a cheque outstanding for months without following up with the payee or cancelling it.
- Plugging the difference with a "sundry" line instead of finding its cause.
Accounting notes
The statement does not change the bank statement; it is a working paper that proves the difference is explained. The balance on the balance sheet is the adjusted book balance after the adjusting entries, and the reconciliation is filed with each month's bank statement.
How an accounting system shortens reconciliation
When every bank transaction is recorded with its entry on the day it happens, month-end matching shrinks to the open items. Microtec accounting software is an ERP system for businesses in Saudi Arabia that brings sales, purchasing, inventory, finance and HR into one place.
Frequently asked questions
Is bank reconciliation done every month?
Yes, for every bank account once the month-end statement arrives. Businesses with heavy bank activity reconcile weekly, because a difference is easier to trace in one week than in a month.
What do I do with a bounced cheque?
Deduct it from the book balance in the statement and record Dr Customers / Cr Bank so the amount becomes a receivable from the customer again, then follow up to collect it.
Do I record entries after the bank reconciliation?
Yes, for every item that adjusts the book balance: charges, direct collections, returned cheques and book errors. Bank-side items such as outstanding cheques need no entry.
Who signs the bank reconciliation statement?
The person who prepared it and the person who reviewed it, ideally someone other than whoever records bank transactions. Download it as a PDF from the Statement and entries tab, which has both signature lines.
What if a difference remains after reconciling?
Enter the month's transactions from both sides in the Transaction matching tab. A transaction on one side only, or with a different amount, is highlighted, and that is usually the missing item.