Balancing your company's checkbook
When it comes time to make decisions about what your company should do, knowing how much cash the company has can be a significant issue. But relying on the bank statements alone can lead to poor decision-making. That's why a monthly bank reconciliation needs to take place after the end of each month.
Although there are many ways to perform a bank reconciliation, the concept is always the same:
Start with your ending balance on the bank statement.
Do you have any deposits that weren't listed on the bank statement, even though the deposit date was up to the date of the bank statement? Add them to the bank balance.
Likewise, did you write any checks that weren't listed on the bank statement, even though the check date was up to the date of the bank statement? Take them off the bank balance.
Finally, if you or the bank made any errors, adjust your total.
You now have your adjusted balance. It should be the same as your book balance.