Bank Reconcilliation

The next series of blog posts are going to detail the results from our Foursquare national audit. The audit report covered several areas and so rather than communicate everything all at once I’ll break it down into bite-sized pieces over the coming weeks! Our next audit is coming soon and so I hope these posts will be helpful as you conduct your year-end preparations.

Due to the nature of our operations as a registered charity there was considerable attention given to the methods used in the collection of, and accounting for, donations. Establishing a strong system of checks and balances helps deter fraudulent handling of money but more importantly they protect the people who serve in positions of counting and recording the financial resources of the church.

One important check and balance that needs to be in place is the monthly reconciliation of all bank accounts. This ensures that bank balances reported on the financial statement are accurate and can be depended upon by the church council to make financial decisions. In this area the auditors made the following recommendation:

“We notice that bank reconciliations are in general prepared and reviewed by bookkeepers without further verification or approval by another person. We recommend that the monthly bank reconciliations and the corresponding bank transactions be reviewed and approved by a senior staff with sufficient accounting knowledge.”

In the case of the church this would be a monthly review done by the Council Treasurer. If the Council Treasurer is the bookkeeper then this could be done by another member of the council with an understanding of accounting processes.

A simple way to put this into practice is to have the bookkeeper attach a copy of the bank reconciliation and bank transaction report to the monthly Ministry Report (the bottom section of the report asks whether the bank reconciliation was completed for the month). The Council Treasurer can then review the bank reconciliation and follow up on any questions before the form is signed and submitted to the national office.

Note: the bank reconciliation and transaction report do not need to be sent with the Ministry Report to the national office. A signature by both the pastor and Council Treasurer is confirmation that this step has been completed.

All bank accounts must be reconciled on a monthly basis. There are 3 different ways a reconciliation can be done:

 

Manual Bank Reconcilliation

Reports and forms you will need to complete a bank reconciliation:

  1. Paper Bank Statement mailed by the bank every month or printout from online banking site.
  2. Ledger of bank transactions, deposit book, cheque book.
  3. Bank Reconciliation Form (download form below)

 

Steps to complete the form referenced by letters A to E.

[A] Ending Bank Balance on Bank Statement: Enter month end balance from the bank statement or the online bank printout on bank rec form [see section A]

  • Note: some banks use a cutoff date for their statements that may not be the last day of a calendar month. In those cases, use the ending balance that appears on the following month’s statement or get the ending balance from the online banking site.

[B] Outstanding Deposits: Compare deposits on bank statement with deposit book and manual ledger.

  • Place a check mark on bank statement, deposit book and manual ledger for each deposit that matches.
  • Circle deposits that show in accounting system but not on the bank statement.
  • Enter outstanding deposits date and amounts on the bank rec form [see section B].
  • Deposits in Transit: When deposits are made at the end of the month, the bank may not post the deposit to your account until the next month. This is particularly true if you make deposits using a bank's ATM or night drop. Deposits made on a Friday night that happens to also be the last day of the month will not be credited to your account until the next business day and the start of the next month.

[C] Outstanding Cheques: Compare cheques on bank statement with cheque book and manual ledger.

  • Place a check mark on bank statement, cheque book and manual ledger for each cheque that matches.
  • Circle cheques that show in accounting system but not on the bank statement.
  • Enter outstanding cheque numbers and amounts on the bank rec form [see section C].
  • Outstanding Cheques: represent checks written by the church and recorded in the general ledger but not cleared by the bank. For example, if you mailed a payment to a vendor near the end of the month, the vendor may not deposit the check into their account for a few days. If a check does not clear the bank by the end of the month, it is outstanding.

[D] Ending Bank Balance in Sage Accounting System: Enter the month ending balance from the manual ledger on bank rec form [see section D].

[E] Reconciling to Zero

  • The form will automatically calculate whether the difference between the reconciled bank statement balance and the manual ledger. [see section E].
  • Differences can be due to unrecorded bank charges and fees, cheques or deposits in manual ledger.
  • Differences should be adjusted in the manual ledger to reconcile to zero.

 

Manual Bank Reconcilliation - Sage Accounting

Reports and forms you will need to complete a bank reconciliation:

  1. Paper Bank Statement mailed by the bank every month or printout from online banking site.
  2. Printout of the bank account transactions from the accounting system. Report is called “General Ledger” or “Transactions by Account”.
  3. Bank Reconciliation Form (download form below). Below are steps to complete the form referenced by letters A to E. (Bank Reconciliation can also been done in Sage Accounting. See Help Sheet for Reconciliation in Sage Accounting System.)

[A] Ending Bank Balance on Bank Statement: In Section A, Enter month end balance from the bank statement or the online bank printout on bank rec form.

  • Note: some banks use a cutoff date for their statements that may not be the last day of a calendar month. In those cases, use the ending balance that appears on the following month’s statement or get the ending balance from the online banking site.

[B] Outstanding Deposits: Compare deposits between bank statement and bank transaction record from the accounting system.

  • Place a check mark on bank statement and transaction record beside each deposit that matches.
  • Circle deposits that show in accounting system but not on the bank statement.
  • In Section B, enter outstanding deposits date and amounts on the bank rec form.
  • Deposits in Transit: When deposits are made at the end of the month, the bank may not post the deposit to your account until the next month. This is particularly true if you make deposits using a bank's ATM or night drop. Deposits made on a Friday night that happens to also be the last day of the month will not be credited to your account until the next business day and the start of the next month.

[C] Outstanding Cheques: Compare cheques on bank statement with the bank transaction record from the accounting system.

  • Place a check mark on bank statement and transaction record beside each cheque that matches.
  • Circle cheques that show in accounting system but not on the bank statement.
  • In Section C, enter outstanding cheque numbers and amounts on the bank rec form.
  • Outstanding Cheques: represent checks written by the church and recorded in the general ledger but not cleared by the bank. For example, if you mailed a payment to a vendor near the end of the month, the vendor may not deposit the check into their account for a few days. If a check does not clear the bank by the end of the month, it is outstanding.

[D] Ending Bank Balance in Sage Accounting System: In Section D, enter the month ending balance from the accounting system on bank rec form.

[E] Reconciling to Zero: In Section E, the form will automatically calculate the difference between the reconciled bank statement balance and the balance reported in the accounting system.

  • Differences can be due to unrecorded bank charges and fees, cheques or deposits in the accounting system.
  • Differences should be adjusted in the accounting system to reconcile to zero.

Computer Bank Reconciliations - Sage Accounting

Monthly bank reconciliations can be completed using the Bank Reconciliation function in Simply Accounting. For instruction on setting up and performing the bank reconciliation please download and print the instructions below and watch the training videos.

Training Videos:

Setup Sage Bank Reconcilliation

Monthly Bank Reconcilliation 

 

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