Reconciledrill / Cheat sheet

Bank reconciliation cheat sheet

The whole bank reconciliation on one sheet: which side each item goes on, whether to add or subtract, the journal entry it needs (only book-side items get one), and the order to work in when the two balances will not meet. Most entries have a drill with a fresh statement and ledger. Print the page or get the PDF by email.

The ones worth learning first

What	How
The format	`Bank balance ± timing differences = Adjusted balance = Book balance ± bank items and book errors`
Bank side	`Statement balance + deposits in transit - outstanding checks ± bank errors`
Book side	`Ledger balance + interest + collections - fees - NSF checks ± book errors`
Only the book side gets journal entries	`The bank will catch up on its own; your ledger will not`
Deposit in transit	`In the books, not yet on the statement: add on the bank side`
Outstanding check	`In the books, not yet cleared: subtract on the bank side`
Bank fee	`Subtract on the book side: Dr Bank Charges Expense / Cr Cash`
NSF check	`Subtract on the book side: Dr Accounts Receivable / Cr Cash`
Interest earned	`Add on the book side: Dr Cash / Cr Interest Revenue`
Note collected by the bank	`Add on the book side: Dr Cash / Cr Notes Receivable, Cr Interest Revenue`

Timing differences (bank side, no entry)

Deposit in transit	`Recorded in the books, not on the statement: + bank side` drill
Outstanding checks	`Written and recorded, not yet cleared: - bank side` drill
Both at once	`Add deposits in transit, subtract outstanding checks, in that order` drill
A busy month	`Tick every statement line against the ledger; what is left unticked in the ledger is a timing item` drill
End-of-month rush deposit	`A deposit dated the last day usually shows next month: deposit in transit` drill
Same payee, different amounts	`Match by check number, not by payee` drill
How to find them	`Compare the ledger list of checks and deposits with the statement, line by line, and mark the matches`

Bank items (book side, entry needed)

Monthly service charge	`- book side. Dr Bank Service Charges / Cr Cash` drill
Interest earned	`+ book side. Dr Cash / Cr Interest Revenue` drill
NSF (bounced) customer checkAdd the bank's NSF fee to the receivable if you charge it back.	`- book side. Dr Accounts Receivable, customer / Cr Cash` drill
Note collected by the bank	`+ book side. Dr Cash / Cr Notes Receivable, Cr Interest Revenue (less any collection fee: Dr Bank Charges)` drill
Automatic payment (loan, utility)	`- book side. Dr Loan Payable or Expense / Cr Cash`
Direct deposit from a customer	`+ book side. Dr Cash / Cr Accounts Receivable`
Check printing, wire fees	`- book side. Dr Bank Charges / Cr Cash`
Everything from the bank in one month	`Work the statement top to bottom; every unrecorded line is a book-side item with an entry` drill

Errors

Transposed digits in the books (recorded 540 for 450)	`Difference divisible by 9. Book side: adjust by the difference; entry corrects the original account` drill
Deposit recorded short in the books	`+ book side for the shortfall. Dr Cash / Cr the account credited originally (Sales, A/R)` drill
Check recorded too low in the books	`- book side. Dr Expense or A/P / Cr Cash`
Bank charged someone else's check	`+ bank side (bank error, no entry); notify the bank` drill
Bank recorded a deposit twice	`- bank side, no entry`
Recorded twice in the books	`Reverse one: entry opposite to the duplicate` drill
Errors on both sides	`Fix the bank side first (no entries), then the book side (entries)` drill
Which side is wrong	`Compare the statement amount with the check or deposit slip: the source document is right; whoever differs from it made the error`
Divisible by 9	`Transposition. Divisible by 2: an item added instead of subtracted. Exactly one item's amount: it was left out.`

Prior-month items

Last month's outstanding check cleared	`Nothing to do; it drops off the outstanding list` drill
Still outstanding from last month	`Stays on the outstanding list until it clears (void and reissue after 6 months)` drill
Last month's deposit in transit	`Should appear in the first days of the statement; if not, chase the bank` drill
Carry-forward cleanup	`Start from last month's reconciliation: clear what cleared, carry what did not, add this month's` drill
Stale checks	`Void: Dr Cash / Cr A/P (or the original credit), then reissue if still owed`

Journal entries

Fees and interest together	`Dr Bank Charges, Dr Cash (interest) / Cr Cash (fees), Cr Interest Revenue (or two entries)` drill
NSF check	`Dr Accounts Receivable / Cr Cash` drill
Collection by the bank	`Dr Cash / Cr Notes Receivable, Cr Interest Revenue` drill
Correcting a book error	`Entry for the difference, to the account used in the original entry` drill
All entries for one month	`One compound entry or one per item; total change to Cash must equal book balance minus ledger balance` drill
Rule	`Bank-side items never get an entry. Every book-side item gets one.`
After posting	`The Cash ledger must equal the adjusted balance on the reconciliation`

Month-end close steps

1. Gather	`Bank statement, cash ledger, last month's reconciliation, deposit slips, check register`
2. Tick deposits	`Statement deposits vs ledger deposits; leftovers in the ledger are deposits in transit`
3. Tick checks	`By check number; leftovers in the ledger are outstanding checks`
4. List bank items	`Statement lines with no tick: fees, interest, NSF, collections, auto-payments`
5. Bank side	`Statement balance + DIT - outstanding ± bank errors = adjusted` drill
6. Book side	`Ledger balance + credits - debits ± book errors = adjusted` drill
7. Compare	`The two adjusted balances must match; if not, use the difference tests` drill
8. Post entries	`Journal entries for every book-side item; re-check the ledger` drill
9. File	`Reconciliation, statement, outstanding list carried to next month` drill
Retail month-end	`Daily deposits: the last one or two days are in transit; card fees are book-side items`
Service business	`Few deposits, many checks: the outstanding list is the main work`
Rental company	`Tenant direct deposits are book-side credits; match by tenant and amount`

Quick tests when it does not balance

Difference / 9 is whole	`A transposition somewhere`
Difference / 2 equals an item	`That item was added instead of subtracted (or the reverse)`
Difference equals one item	`That item was left out of one side`
Difference equals a fee or interest	`A bank item not yet picked up`
Recount the outstanding list	`A check from last month that cleared this month is still on it`
Check the opening balances	`Statement opening must equal last month's statement closing; ledger opening must equal last month's adjusted balance`

reconciledrill.com: practice every one of these with instant checking. 54 entries.

Questions

Which items need a journal entry?

Only book-side items: bank fees, interest, NSF checks, collections, automatic payments, and errors in your own books. Deposits in transit, outstanding checks and bank errors are bank-side and need no entry; the bank's records will catch up.

What do I do with a check outstanding for months?

Keep it on the outstanding list while it is valid. After the stale period (often six months), void it with an entry that reverses the original, contact the payee, and reissue if the amount is still owed.

The adjusted balances differ by a strange amount. Where do I start?

Divide the difference by 9: a whole result means a transposition. Divide by 2: if it equals an item, that item is on the wrong side. If it equals a single item, that item was left out. Otherwise re-tick the outstanding check list against last month.

Why does the reconciliation matter if the bank is always right?

The bank is not always right, and your ledger is what the financial statements are built from. The reconciliation finds the unrecorded fees, the bounced checks, the duplicates and the fraud, and proves the cash balance before the books close.

A cheat sheet does not make them stick

Doing them with instant checking does. The free exercises need no account.

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