Reconciling an Online Bank Statement
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Before the days of online banking, reconciling the bank statement used to rank right up there with getting a root canal, and it had to be done every month. The reason for the reconciliation was to ensure that the two different transaction periods reflected in the financial records for your checking account matched. Common errors were checks added to the balance in your check register rather than subtracted, and neglect to enter a check in the register when it was written. Even the most meticulous record keepers occasionally found an error in their check register so the incentive was there to continue the onerous process.
Accounting software
Today, however, with the widespread use of personal accounting software and online banking, many people no longer feel the necessity of doing a formal bank reconciliation on their personal checkbook each month. Although it is true that most personal finance software has the capability of helping do the reconciliation to your bank statement if you still get a paper statement, and online bank statements can usually be loaded into your accounting software, this does not resolve the fact that banks sometimes make mistakes. In fact, there are two basic reasons why you should continue to reconcile your transaction to the bank statement:
- To find and notify the bank when they have made an error in the checks or deposit transactions which have occurred in your account.
- To determine if an unauthorized charge or deposit to your account has been made
Reconciliation of bank statement
To reconcile your checkbook balance to the monthly financial statement issued by the bank is a relatively simple process. You begin with the bank balance at the end of the period. Check off each checkbook item and add any deposits that are in the checkbook, but have not yet cleared the bank account. Then note any checks from your checkbook that have not yet appeared on the bank statement transactions and subtract them. This completes the adjustments to the bank balance.
Reconciliation of check register
Working from the bank transaction record, note any deposits that show on the bank statement but are not recorded in your checkbook. The total of these deposits should be added to your checkbook balance. Then subtract any valid checks or other reductions not previously recorded, from your checkbook balance. You should check these items more closely to ensure that they are not unauthorized charges against your account. Your checkbook balance should be adjusted to reflect these additional reductions. Finally, you should note the effect of any interest earned on your checking account or any bank service fees. At this point your checkbook balance should agree with your adjusted bank balance.
Timeliness
Since most online bank accounts allow you to check items that have passed through your bank account daily, you may be performing a type of reconciliation almost daily. Never just assume that the bank figure must be right and adjust your checkbook accordingly. Bank errors are somewhat limited, but they definitely do occur. If you do not let the bank know within a short period of time that there is an error in the account, you may end up holding the bag for unauthorized expenditures.
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