Bank reconciliation: the statement and the books never agree
And not because there is a mistake: because they measure different things at different moments. Reconciling means explaining the difference, not making it disappear.
The process of reconciling the balance on the bank statement with the accounting balance of the current account, identifying every difference.
It is not an obligation with a name of its own anywhere in the legislation, but without it the accounts are no use for making any decision. The usual differences:
- Fees and charges the bank has taken and nobody has entered.
- Returned direct debits that the accounts still show as paid.
- Grouped receipts: one transfer paying three invoices at once.
- Payments issued that the bank has not yet debited.
How it is done
You start from the statement balance, add the receipts already entered in the books that the bank has not yet shown, subtract the payments issued but not yet debited, and enter in the books everything the bank has already moved that was not recorded. Almost every bank exports the statement in the standard format of the AEB's cuaderno 43, which can be imported directly.
An example with numbers
At 30 September, the statement shows €18,240.55 and account 572 in the books shows €18,612.30. The difference is €371.75:
- €42.75 of account maintenance and batch fees that were never entered.
- €329.00 from a returned direct debit that the accounts still had marked as paid.
Both adjustments are journal entries, not manual corrections to the balance. And the second one also puts the client back on the list of outstanding receivables, which is where they should have been from day one.
The mistake that comes up most
Leaving the reconciliation until the year-end. In December you have to reconstruct twelve months of fees, returns and grouped transfers, from statements that many banks no longer let you download beyond a certain period. Done every month, it takes twenty minutes.
Where this carries on in Cairos: Payments in, payments out and the real balance.
Terms that go with this one
Almost no tax concept makes sense on its own. These three are the ones that most often turn up beside it.
Journal entry
The entry that records an economic event in the journal, split between debit and credit accounts for the same amount.
Payments and bankingDirect debit batch
The set of debits or payment orders sent to the bank in one go, in a file in a standard format.
Payments and bankingDue date
The date on which the amount of an invoice becomes payable and from which it starts to generate interest for late payment.
This, handled without thinking about it
Cairos keeps the invoices, the record books and Hacienda's forms from the same data, so the theory on this page turns into boxes that are already filled in.
No card and no minimum term.