What is a bank reconciliation? And how to do one

What is a bank reconciliation? And how to do one

Bank reconciliations are recommended to make sure all your accounting is correct and that your records match your bank balance. But what is a bank reconciliation, and how do you do one? In this comprehensive guide, you’ll find everything you need to know about bank reconciliations and a step-by-step guide to completing one for free in Bokio.

What is a bank reconciliation?

Bank reconciliation is the process of matching the balance in your bank account with the bank balance in your accounting software, like Bokio.

How often should you do one?

Reconciling your bank balance is important to ensure that your bookkeeping is accurate. We suggest that it is probably best to run this check a minimum of once a month, but if you have lots of bank transactions then weekly or even daily would be better.

Why does the bank balance not match accounting records?

When you're doing your bookkeeping with Bokio, our solution makes the process of doing a bank reconciliation really easy by allowing bank transactions to be copied and pasted from your online banking into Bokio. However, even if you have used this feature your bank balance may not agree with your accounting for the following reasons:

  • You have copied some transactions twice so they have been imported twice
  • You have imported transactions and recorded them through bank import, but you may have already recorded them manually
  • You have missed some date ranges when copying from your bank
  • You have imported duplicate bank statements, although Bokio will normally provide you with a warning you if this happens

How to do a bank reconciliation

The best way of doing a bank reconciliation in Bokio is as follows:

Step 1

Go into Reports → General Ledger and click on the year, you will then get the option for a custom interval.

Step 2

Select the period that you wish to reconcile your bank for.

Step 3

Check if the closing balance highlighted below in account 1200 (the default bank account in Bokio) agrees to balance in your bank account on the same date. If it does then your bank is reconciled for this period. It’s that simple.

If the balance doesn’t agree then something is missing and you need to continue to the next step.

General ledger in Bokio

Step 4

Now you need to find the difference between the balance in your actual bank account compared to the balance in Bokio. The first step is to expand account 1200 so that you can see the breakdown, or alternatively you could click on the download button which will automatically expand all accounts into a PDF document.

The first thing to check is that the opening balance at the start of your chosen period agrees. If it does agree then move on to the next step, however if it doesn’t then work backwards to find the last date that it does match and start from there.

View of general ledger in Bokio

Step 5

Compare transactions that make up the closing balance in Bokio to your bank statements and check for:

  • Duplicates in Bokio
  • Missing transactions
  • Incorrect transactions

If you have lots of transactions you can use the download PDF button and highlight each transaction on the PDF as you match them to the bank. You can do this the same with the bank statement by exporting as a spreadsheet or PDF.

Step 6

Remove any duplicates and record any missing transactions, then refresh the report in Bokio to ensure that the bank balance agrees.

Although we only mention account 1200 this process should be followed for all bank accounts that you have in Bokio and the same for credit cards.

Because all of Bokio's features are free, you don't need to pay or use a template to complete your bank reconciliation easily.

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