Final answer:
To prepare a monthly bank reconciliation, start with the ending balance from the bank statement, adjust for deposits in transit and outstanding checks, account for any fees or interest, compare and adjust your checkbook register, and ensure both records match after adjustments. The final step is to summarize your transactions to find the current account balance.
Step-by-step explanation:
Steps to Prepare a Monthly Bank Reconciliation
Preparing a monthly bank reconciliation is an essential process for managing one's finances accurately. This task allows you to verify that your records match the bank's records and to identify any discrepancies in a timely manner. To perform a bank reconciliation, follow these general steps:
Start with the ending balance from your bank statement.
Adjust this balance by adding any deposits in transit that have not yet been credited by the bank.
Subtract any outstanding checks or withdrawals that have not yet been cleared or deducted from the bank's balance.
Include any bank charges or fees not yet recorded in your records.
Adjust for interest income or electronic transfers that have occurred but are not recorded in your register.
Compare the adjusted bank balance with the current total in your checkbook register.
Investigate and resolve any differences or discrepancies.
Ensure all changes are recorded in your checkbook register to reflect the true available balance.
Verify that after adjustments, both the bank statement and your checkbook register have the same adjusted ending balance.
Finally, sum up your columns for Exports, Imports, and Balance. The final balance number is the current account balance.
Maintaining an accurate and balanced checkbook is essential for good financial health, preventing overdraft fees and managing cash flow more effectively.