Initial Bank Reconciliation
Article ID: 2024821 Last updated: 19 November 2010
When setting up your AccountEdge company file, you need to give special attention to your bank account. A procedure known as an initial bank reconciliation is needed so that AccountEdge can correctly account for un-presented cheques and deposits at the time you begin using your company file.
To check the accuracy of your business records, you should check that the record of your bank account balances matches the amounts on your bank statements. This task is called reconciling accounts.
If your business traded prior to your conversion month and you have uncleared banking transactions as at the first day of your conversion month, you need to do an initial bank reconciliation.
Uncleared banking transactions are withdrawals and deposits that have not been cleared by your bank as at the start of your conversion month.
Note! Do you need to complete this task?
The initial bank reconciliation procedure needs to be done for each bank account that had uncleared transactions as at the first day of your company file's conversion month. To check your conversion month, go to Setup> Company Information.
- Enter the bank account opening balance
- Post the un-presented cheques
- Post the un-presented deposits
- Perform initial bank reconciliation
- Perform you first real bank reconciliation
What is Bank Reconciliation?
In any accounting system, bank reconciliation explains the differences between the £ balance of your bank statement and the £ balance of your own cash book/bank account. Here, the term cash book balance refers to the amount of money your records show as being in your bank account. If your Bank Reconciliation 'balances', your accounts should be accurate.
When you use AccountEdge's Reconcile Accounts function, you need to be able to tick off every transaction as it appears on the bank statement. In other words, every transaction on the statement has to be mirrored in AccountEdge and if it is not perfectly mirrored, you cannot reconcile your account.
Transactions that affect the bank account, such as cheques and deposits will automatically find their way into the Reconcile Accounts window. They wait to be ticked off when you reconcile your bank account. Example:
Bank Reconciliation as at 01/01/15:
|Balance as per Bank Statement
|Less unpresented cheques:
| Cheque 12568
| Cheque 12569
|Plus deposits not yet credited on any statements
|Balance as per company bank account
Here the bank statement shows you have £12,000 in the bank account, whereas your own figures in AccountEdge show you have £8,000. When entering your nominal ledger Opening Balance as at your Conversion Month, you should enter the Balance as per Company Bank Account. In the above example £8,000 is the correct Opening Balance to enter into AccountEdge.
What is an Initial Bank Reconciliation?
At the time you started your data file it is most likely that you had many un-presented cheques and un-cleared deposits that will appear on future bank statements. In the above example, cheques 12568 and 12569 were un-presented. These cheques are expected to be presented in the coming months.
This is why you need to enter into AccountEdge your unpresented cheques and deposits that existed as at the first day of your conversion month. Once recorded, these cheques will then appear in your Reconcile Accounts window, ready to be ticked off as they appear on subsequent bank statements.
Important Note about the Bank Reconciliation: All steps shown in this support note must be undertaken before you complete your first month's reconciliation. Once these steps have been completed you can begin your first reconciliation.
Step by Step
Step 1 - Enter the Bank Account Opening Balance
- Go to the Setup menu and select Balances> Account Opening Balances.
- Enter your Cash Book/Bank Book/Bank Balance next to the Bank Account Number. Remember: DO NOT enter the statement balance. The amount should be the statement balance less un-presented cheques as at your conversion month plus any deposits not yet credited.
Step 2 - Record any Unpresented Cheques
- From the Banking menu, select Spend Money.
- Enter each unpresented cheque dated as at the 1st of your Conversion Month. (i.e. if your conversion month was January 2015, enter 01/01/15).
- The allocation account must be the same bank account that is also selected in the top left drop down box. We are deliberately forcing AccountEdge to create an equal debit and credit back to the selected bank account. This ensures that the opening balance you entered for the bank account remains the same. An example of one of these Spend Money transactions is shown below:
Step 3 - Entering Uncleared Deposits
- From the Banking menu, select Receive Money.
- Enter each uncleared deposit dated as the 1st of your Conversion Month. (i.e. if your conversion month was January 2015, enter 01/01/15).
- Allocate the deposit back to the same bank account that is selected in the top left drop-down box. We are deliberately forcing AccountEdge to create an equal debit and credit back to the bank account, this ensures the opening balance you entered for the bank account remains the same. An example of one of these Receive Money transactions is shown below:
Step 4 - Perform the Initial Bank Reconciliation
- From the Banking menu, select Reconcile Accounts.
- Enter the account number of your bank account, e.g. 1-2110.
- Enter the date as the 1st day of your Conversion Month e.g. 01/01/15
- Enter the balance from the bank statement. (Last statement prior to Conversion Month. i.e.: If you Conversion Month was July, your required Statement balance would be as at 30th June.
- Tick the Deposits line of every unpresented cheque as shown below.
- Tick the Withdrawals line of every deposit as shown below.
- Click Reconcile. A message will appear, indicating that your account reconciles, click Reconcile to complete the initial reconciliation.
In our example we are reconciling Bank Account number 1-2110, the date to enter in the Bank Statement Date field is the 01/01/15 (the first day of the conversion month) and the balance on the bank statement (as at 31/12/14) as £12,000.
We need to select the 'deposits line' of cheques 12568 and 12569, and the 'withdrawals line' of the deposit number CR000001, as shown below:
Step 5 - Perform your first REAL Bank Reconciliation
If you have entered the other cheques and deposits that have occurred since the first day of your conversion month, you will be able to complete your first REAL bank reconciliation.
Just enter the bank statement date and balance as shown on your statement, and select all transactions that have appeared on that statement. If there are transactions on the Statement that are not in AccountEdge, enter them first then complete the reconciliation. The out of balance amount should be zero and you will be able to reconcile.
Disclaimer: This information is of a generic nature. For specific advice regarding your particular circumstances please seek assistance from your Accountant, HM Revenue & Customs or your IT Consultant as appropriate.