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Is bank reconciliation difficult?

Yes, bank reconciliation can be difficult, especially at scale. Primary difficulties stem from bank payment delays, the challenge of normalizing payments and bank data, and the need to match a high volume of transactions quickly.

The tables below demonstrate the challenges a fictional university—the University of Modern Treasury (UMT)—might have in reconciling alumni donations. P. Volker’s and J. Powell’s donations, for example, appear as two transactions in the university’s record but only one (batched) transaction on the bank side. Creating a 1:1 match in cases like these can be difficult.

A matching exercise designed to illustrate the challenges of manual reconciliation

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Bank reconciliation is the process of verifying the completeness of a transaction through matching a company’s balance sheet to their bank statement.

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The four steps in bank reconciliation are (1) accessing and comparing deposits between a company’s bank statement and its internal systems of record, (2) normalizing the bank statement as needed, (3) formatting of data from internal systems of record, and (4) comparing the bank statement and internal records to confirm a match.

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The main purpose of bank reconciliation is to ensure that a company’s finances are correctly documented.

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To practice bank reconciliation, businesses may rely on manual processes, automating software, or some combination of the two. Regardless of process, bank reconciliation will always involved these four steps.

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If bank reconciliation doesn’t balance, an error of some kind is indicated—be it a numerical mistake, oversight, or duplication, a human error in comparison or adjustment, or a software problem.

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The three golden rules of accounting are (1) debit all expenses and losses, credit all incomes and gains, (2) debit the receiver, credit the giver, and (3) debit what comes in, credit what goes out.

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