Bank Reconciliation: Fill & Download for Free

A few years ago:Deposited a cheque of ₹40,00,000/- in the bank.Got a confirmation for ₹40,000/- by SMS.Waited for a while to see if they’d make the correction. They didn’t.When I asked the bank teller, he said,”Oh that’s only 2 zeroes missing sir, I was going to do it later but there was a long queue.” I was like, What the F**k!I told the bank manager about it, he laughed & brushed it off.It was a public sector bank. Don’t ask me which one :-). The funniest experience ever! That’s when I realized the importance of bank reconciliation.

My books say I have $546,453.41 in cashMy banks say I have $345.485.87 in cashWhy do the two numbers not agree?This is the answer that a bank reconciliation seeks to answer.In a nutshell, the answer is that there are timing differences between what a company thinks its cash balance is and what the bank thinks it is.From the bank's perspective, their ending balance reflects all deposits that have been credited, all checks that have cleared and any other miscellaneous debits and credits that have been processed during the statement cycle (i.e. the from and to dates for the banking activity being presented).From the company's perspective, it includes activity from the beginning to the end of the calendar month, which often times does not coincide with the bank's cutoff date. There is your first primary timing difference.What happens if you cut checks to pay your vendors, but the check has not yet cleared by bank? Well, your cash would go down, but from the bank's perspective, they don't yet know about it. That's another timing difference.The same goes with deposits you've brought to the bank, but they've not yet processed. Of course, this has an opposite effect as checks not yet cleared (i.e. your balance goes up, but from the bank's perspective it doesn't).In short, a bank reconciliation accounts for all of these timing differences. Additionally, you may also make adjustments to your books for activity that has happened in the bank that you don't know about, such as they've taken money out of your account to pay for their banking fees.Here is what a simple bank reconciliation looks like. It starts with two numbers where, in this example, the bank says you have $4,702 and you think you have $5,332. Now explain the difference. The below example is an explanation of those differences.[This marks my 10,000th answer on Quora]

Whoa! This is perhaps the worst possible news yet for Trump.See, the CFO of an organization really does know “where the bodies are buried”. The reason is that they, and only they, know what the real cash flow is, because ultimately they know what the bank reconciliations are.Now, in a public company, especially since Sarbanes-Oxley, CFOs run on the straight and narrow. But in private companies, they have much more… latitude. Much of this is through the magic of “allocation” — deciding how to classify certain incomes and expenses. This sounds dry and boring, but can have substantial taxation and legal implications.As a result, he is going to be able to give prosecutors incredible insight into the Trump organization, particularly the balance sheet. He will know, more or less to the penny, who they have borrowed money from and what sweetheart deals they might have signed. And, on the flip side, places where they might have, say, allocated “payoffs to paramours” as “legal fees”.This is, truly, the beginning of the end.PS — An added bonus! He was also the CFO of the Trump Foundation.