Bank Reconciliation: Why Balances Differ
A difference between the bank statement and the accounting ledger is not automatically an error. Timing, unrecorded charges and transactions awaiting clarification can all contribute. Reconciliation provides an explanation rather than leaving the difference unresolved.
Use the same starting point
Compare the bank statement and ledger at the same date and in the same currency. Confirm that opening balances are agreed and that the previous period has been reviewed. An unexplained opening difference makes current-period work harder.
Match transactions, not just totals
Review amounts, dates, descriptions and references. One transfer may settle several invoices, while a receipt may arrive net of a fee. Equal amounts alone do not prove that two entries belong together.
Mark matched items and maintain a separate list of transactions needing attention. Keep the original references so another reviewer can follow the work.
Classify the differences
- Bank movements missing from the accounting records.
- Ledger transactions not yet reflected by the bank.
- Duplicate entries or incorrect account postings.
- Transfers with an unclear source or purpose.
Each item needs appropriate evidence or an explanation. Posting the whole difference as an expense simply to make the balance agree removes the symptom without establishing what happened.
A simple example
Suppose the statement shows an AED 150 charge that is absent from the ledger. Review its nature and evidence, then record it in the appropriate account. A payment already recorded but expected to appear at the bank later may instead need timing follow-up, not another entry.
Retain the review trail
Keep the statement, reconciliation schedule, supporting documents and approved adjustments together. Identify the preparer and reviewer, particularly where one person handles both transaction recording and payments.
Choose a practical frequency
Monthly reconciliation is a useful organising point for many businesses, while high-volume operations may need more frequent monitoring. The important control is that unresolved items have an owner and a follow-up date. Do not allow old differences to roll forward indefinitely without explanation.
How EQRAR can help
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