Bank Reconciliation for Client Accounts

Bank reconciliation explains the difference between a client’s bank statement and the matching ledger account at the same cut-off. Compare transactions, correct supported errors and list genuine timing differences. The finished workpaper shows how both closing balances reach the same amount.

Confirm the Account and Period

Start with the legal account holder, the bank account and the period you are reconciling. A trading name alone can hide a different company’s account. Record the account identifier, currency and corresponding ledger account, then confirm your authority to obtain and review the client’s records.

Obtain the bank-issued statement, a ledger transaction extract and the previous completed reconciliation. Request missing statement pages and supporting payment records before matching. Use the bank’s closing balance for the chosen cut-off, rather than an available balance that includes pending transactions or an overdraft facility.

Check that the ledger extract covers the same period and includes its opening balance. The prior bank closing balance must become the new bank opening balance. The prior adjusted ledger balance must carry into the ledger, with prior outstanding items listed separately until they clear.

For a first reconciliation, obtain evidence for the opening bank and ledger amounts and any uncleared items brought into the file. Resolve an unsupported conversion balance before treating it as an agreed starting point.

Explain the Reconciling Items

Reconciling items explain why the bank and ledger can differ even when both contain valid records. An unpresented cheque is already a ledger payment but has not yet reduced the bank statement balance. A deposit in transit has reached the ledger as a receipt while the bank statement still excludes it.

For a positive bank balance, the reconciliation relationship is bank closing balance plus deposits in transit, less unpresented payments, equals the corrected ledger closing balance. Separately identify any evidenced bank error and its direction. Use signed amounts consistently if the account is overdrawn.

In a fictional example, the bank closes at $13,180. A $400 deposit remains in transit and a $600 cheque remains unpresented. The adjusted bank balance is $12,980: $13,180 + $400 - $600. A ledger balance of $13,000 reaches the same amount after recording an omitted $20 bank fee.

The fee needs a ledger entry. The two timing items stay on the reconciliation until they clear. A missing transaction, duplicate import or wrong amount needs investigation before you decide which treatment applies.

A connected bank feed does not establish that every ledger entry is correct. MYOB’s reconciliation guidance still requires reconciliation when bank feeds are used. Compare the bank-issued statement with the ledger, including transactions entered outside the feed.

Complete the Reconciliation in Order

Complete each checkpoint before carrying its result into the next step.

1. Agree the opening position. Trace both opening balances to the previous workpaper and confirm that its outstanding items remain identifiable. Proceed when the opening relationship is explained.
2. Check the extracts are complete. Recalculate bank opening balance plus statement receipts less statement payments against the closing balance. Do the equivalent ledger calculation. Resolve a missing page, filtered export or incorrect sign before matching.
3. Match transactions in both directions. Check statement entries against ledger entries, then inspect unmatched ledger entries. Compare amounts and references with transaction dates. For grouped settlements, retain the component schedule that explains the total. Proceed when each match has evidence beyond a coincidental equal amount.
4. List every exception. Separate bank-only entries from ledger-only entries and carry forward unresolved prior items. Record the amount, explanation and source reference. Continue when every unmatched row has an investigation owner.
5. Record supported corrections. Enter missing transactions or correct errors through the appropriate ledger procedure. Retain the original reference and correction history. Obtain required approval before changing a closed period. Re-export the ledger so the workpaper uses the posted balances.
6. Reconcile the closing amounts. Apply evidenced timing items to the statement balance and compare the result with the corrected ledger. The unexplained difference must be $0. Save the reconciliation report and submit the supporting workpaper for review.

An equal closing balance does not prove correct account coding or GST treatment. Inspect the underlying invoice or other source document when deciding how a transaction is recorded.

Investigate a Difference Before Posting

Investigate a difference by finding the source record that explains it. Never insert an unexplained balancing journal to make a reconciliation report show zero.

A cheque’s age alone does not extinguish the debt. Record who will follow up the payment and when they will review it again. If a bank error is suspected, retain the bank enquiry and show its effect separately until resolved.

When the difference remains unexplained, recheck the account, cut-off and signs before widening the search. Then inspect duplicated amounts, omitted rows and edits to earlier reconciled entries. Keep the workpaper open with the remaining difference and the evidence requested.

Prepare the Bank Reconciliation Statement

Prepare a bank reconciliation statement that records both starting balances and the items needed to explain their difference. Keep the detailed outstanding-item schedule beside the summary, with evidence references that another reviewer can follow.

Excel-Compatible Statement Format

Use column A for the following labels and column B for numeric amounts. Enter receipts and payments as positive values in their respective rows. Put the evidence reference beside each amount in column C. Rows 2 to 4 describe the bank movement and rows 9 to 11 describe the ledger movement.

This is a reusable Excel bank reconciliation template: reproduce the row labels and enter the formulas in the stated cells. Keep amounts numeric and apply currency formatting. Add separately labelled rows for other evidenced adjustments, then update the affected formulas. Do not overwrite a formula with a balancing amount.

Above the statement, record the legal account holder, account identifier, ledger account and period start and end. Include the preparer and reviewer, their completion dates and the workpaper version. Leave those fields for the actual engagement.

Completed Fictional Example

The example uses one fictional client company’s operating account and its matching ledger. Both open at $10,000 with no prior outstanding items. All amounts are cash movements. The $20 fee is the full amount charged, with no GST credit assumed.

The preparer records the fee entry and attaches the revised ledger. An independent reviewer checks the arithmetic and traces both timing items to their evidence. Receipt D1 has cleared after the cut-off, so it remains a valid reconciling item at the cut-off. Cheque C1 carries into the next reconciliation for follow-up.

Daily, Weekly or Monthly Review

Choose a frequency that fits transaction volume and the client’s exposure to errors. Daily bank reconciliation suits busy payment accounts where unresolved movements need prompt attention. A weekly bank reconciliation template uses the same fields and carries each outstanding item into the next week. Monthly bank reconciliation aligns the closing workpaper with the client’s monthly reporting period.

For daily or weekly work, retain bank transaction records that establish the balance at that cut-off. Agree the accumulated work to the complete statement when it arrives. Assign each outstanding item an age, owner and next review action so frequent matching does not conceal old problems.

The internal-control purpose is to detect errors or unexplained cash movements before reports rely on them. Have someone independent of payment preparation review the completed statement where staffing allows. In a small practice or business, assign a documented review to the principal or another authorised person who can challenge the evidence.

Review and Retain the Working Papers

Keep the source statement and ledger extracts with the final reconciliation, supporting explanations and posted correction references. Retain the outstanding-item schedule and both the preparer’s completion record and reviewer’s sign-off. Business Queensland’s record-keeping guidance identifies bank statements and source documents as records to retain.

The reviewer must check that the workpaper covers the correct account and period. Compare the client’s account list with the accounts reconciled, including dormant accounts that still hold a balance. Trace the adjusted closing amount to the financial reports and examine old outstanding items individually.

A zero unexplained difference can coexist with an omitted account, a wrong reporting period or a payment allocated to the wrong expense. Two equal errors can also offset each other. Check completeness and coding separately before approving the records for reporting or BAS preparation.

Retain the file under the applicable record-retention requirements and the engagement’s document policy. Keep the underlying evidence accessible alongside the report so a later reviewer can reconstruct the reconciliation.

Choose the Next Check

The remaining issue determines which check to use next. For a local comparison of transaction files, use the bank statement reconciliation tool to identify candidate matches and unexplained rows. Review those results against the source records before making ledger changes.

For a ledger’s screens and completion report, use the guide for NetSuite bank reconciliation, Sage bank reconciliation or Business Central bank reconciliation. These instructions apply the procedure inside the relevant product.

If matching and review features are driving a ledger change, compare bookkeeping software. For the current period, finish with an explained closing balance, supported corrections and a reviewer who can follow every remaining timing item.