Bank Reconcilia on Statement (BRS)

A Bank Reconcilia on Statement is a valuable internal tool that helps companies compare their
accoun ng records’ balance with their bank account balance. Here’s how it works:

Purpose: The statement iden fies discrepancies between the two balances and ensures that payments
were processed correctly and cash collec ons were deposited into the bank account.

Process:

Comparison: It summarizes banking and business ac vity, including deposits, withdrawals, and other
transac ons affec ng the bank account during a specific period.

Adjustments: Any discrepancies lead to necessary adjustments or correc ons.

Error Detec on: It catches simple errors, duplica ons, and accidental discrepancies that could impact
financial and tax repor ng.

Fraud Detec on: It’s effec ve for detec ng fraud, the , and loss. For instance, if a check is altered, the
payment made for that check may be larger than expected. Detec ng this during reconcilia on allows
you to take correc ve measures.

Risk Management: Accurate financial statements help with organiza onal planning and cri cal
business decisions.

Accoun ng So ware used for BRS

1. SAP
2. Quick Books
3. Black Line
4. Zoho Books
5. Net Suite
6. Oracle
7. Xero
8. Sage
9. Fresh Books
10. Wave
11. Recon Art
Step by step guide to the Manual BRS

1. Obtain the bank statement: Obtain the latest bank statement for the relevant period from the bank.

2. Gather internal records: Gather the company's internal records, such as cash receipts, check
register, and other relevant documents that reflect the Co's financial transac ons for the same period
covered by the bank statement.

3. Compare deposits: Compare the deposits listed on the bank statement with the company's internal
records. Look for any discrepancies, such as missing deposits or discrepancies in the amounts.

4. Compare withdrawals: compare the withdrawals or payments listed on the bank statement with
the company's internal records. Check for any discrepancies, such as missing payments or differences
in the amounts.

5. Note outstanding checks and deposits in transit: Iden fy any outstanding checks that have not yet
cleared the bank and any deposits that have been made but are not yet reflected in the bank
statement. These items are known as outstanding checks and deposits in transit, respec vely.

6. Adjust for bank charges and interest: Take into account any bank charges, fees, or interest earned
that may have been recorded on the bank statement but not yet reflected in the company's records.
Make the necessary adjustments accordingly.

7. Reconcile differences: Reconcile the differences between the company's records and the bank
statement by adjus ng the balances accordingly. Account for any discrepancies, outstanding checks,
deposits in transit, and other factors that may contribute to the differences.

8. Prepare a bank reconcilia on statement: Prepare a BRS that summarizes the reconciling items, such
as outstanding checks, deposits in transit, bank charges, and any other adjustments made during the
process. This statement acts as a formal record of the reconcilia on process.

9. Inves gate and resolve discrepancies: significant discrepancies between the company's records and
the bank statement. Look for possible errors, unauthorized transac ons, or other issues that may
require further a en on. Resolve any outstanding issues by contac ng the bank or making the
necessary adjustments in the accoun ng records.

10. Update accoun ng records: Once the reconcilia on process is complete and any discrepancies
have been resolved, update the Co's accoun ng records to reflect the reconciled balances.
Steps for BRS in SAP

1. Upload Bank Statement:

Use T-Code FF6B to import the electronic bank statement into SAP.

2. Process Bank Statement:

Use T-Code FEBAN to process the uploaded bank statement, ensuring all transac ons are correctly
posted.

3. Clear Bank Statement Items:

Use T-Code FEBP to manually clear any unmatched or par ally matched bank statement items.

4. Automa c Clearing:

Use T-Code F.13 to automa cally clear open items in the system, streamlining the reconcilia on
process.

5. Review and Adjust:

Use T-Codes FBL3N and FS10N to review G/L account line items and balances, making any necessary
adjustments.

6. Generate Reports:

Use T-Codes FF_6 and other relevant repor ng tools to generate cash posi on and reconcilia on
reports for review.
Steps for BRS in Quick Books

1. Gather the Bank Statement from client.

2. Check the Beginning balance and Ending balance.
3. Enter the current month Last date. Ex. 31st Dec.
4. Reconcile the Deposits with the Bank Statement.
5. Reconcile the Payments with the Bank Statement.
6. Beginning balance less payments add deposits.
7. Check the Total amount should be 0.
8. If it is 0. Check the Reconcilia on Report – Summary.
9. If it is not 0. But having Amount means check the uniden fied transac ons.
10. Reasons could be Uniden fied Receipts, delayed payments, delayed checks, refunds, Duplicate
transac ons, bank charges, other charges, etc.
11. Those mismatches amounts should be Carry forward to next month. Men on the comments
for Audit.
12. Ask the client for Invoice to reconcile the pending.
Step by step guide to the Automate BRS

Select Appropriate So ware:

Choose accoun ng so ware or dedicated bank reconcilia on so ware that fits your business needs.
Examples include QuickBooks, Xero, Sage, and specialized solu ons like Blackline and Recon Art.

Integrate with Bank Accounts:

Ensure your chosen so ware can integrate directly with your bank accounts for automa c data import.
This o en involves providing the so ware with read-only access to your online banking.

Set Up Rules and Categories:

Define rules for categorizing transac ons automa cally. For example, recurring payments and deposits
can be automa cally matched based on amount, date, and descrip on.

Import Data:

Import transac ons from both the bank statement and the company’s cash book into the so ware.
This can o en be done automa cally or by uploading statement files.

Automa c Matching:

The so ware will automa cally match bank transac ons with those in your accoun ng records based
on predefined rules. Transac ons that match exactly are reconciled automa cally.

Review Excep ons:

Review any unmatched or par ally matched transac ons manually. The so ware typically flags these
for review, allowing you to inves gate and resolve discrepancies.

Generate Reconcilia on Report:

Once all transac ons are matched or reviewed, generate the bank reconcilia on statement. The
so ware will compile this report, showing any outstanding items and adjustments made.
BRS Roll forward

+ Deposit in transit

+ Interest income

+ Bank collec ons

- Outstanding Checks

- Service Charges

- NSF (Non-Sufficient Funds) Checks

BRS Challenges

1. Duplicate Transac ons

2. Missing Transac ons
3. Uncleared Checks
4. Bank Errors
5. Book Errors

BRS Checklist

1. Bank Statement
2. Sub Ledger (Reports)
3. Cash Book (Client Books)
4. Bank Deposit Slips
5. Withdrawal Slips
6. Cancelled Checks
7. Backup Data – Manual or System
8. Deposit Matching
9. Withdrawal and Payment Matching
10. Outstanding Checks
11. Deposits in Transit
12. Bank Errors
13. Book Errors
14. Bank Charges
15. Interest Income
16. Calculate Adjusted Balances
17. Document Reconcilia on
18. Review Process
19. Secure Documenta on
SAP T-codes for the BRS

Key SAP T-Codes for Bank Reconcilia on Statement (BRS)

1. FF67 - Manual Bank Statement

2. FEBA - Pos ng Electronic Bank Statement
3. FEBAN - Bank Statement Overview
4. FEBP - Process Bank Statement Items
5. FF.5 - Foreign Exchange Revalua on
6. FF68 - Manual Account Statement
7. FF6B - Import Electronic Bank Statement
8. FF_6 - Cash Posi on
9. FEBC - Display Log for Bank Statement Processing
10. F.13 - Automa c Clearing
11. FB05 - Post with Clearing
12. FBL3N - G/L Account Line Items
13. FS10N - G/L Account Balance Display
14. FAGLL03 - G/L Account Line Items (New)
15. F-28 - Post Incoming Payments
16. F-53 - Post Outgoing Payments
FAQs

1. How do you prepare a bank reconcilia on statement?

To prepare a bank reconcilia on statement, compare the bank statement balance to the balance in the
company’s accoun ng records, iden fy any discrepancies, and make adjustments for any outstanding
checks, deposits in transit, bank errors, or other items that may not be in the company’s records.

2. How to reconcile bank accounts?

To reconcile bank accounts, compare your bank statement to your records, no ng any discrepancies.
Adjust your records to match the bank statement, considering deposits, withdrawals, fees, and errors.
Reconciling ensures accurate financial records.

3. What are the two items used to reconcile a bank account?

To reconcile a bank account, you use the bank statement, showing transac ons processed by the bank,
and compare it with the company’s cash records, accoun ng for any differences like outstanding
checks or deposits in transit. This process ensures accurate tracking of financial transac ons and
balances.

4. What are the three methods of preparing bank reconcilia on?

The three methods of preparing a bank reconcilia on are the Adjusted Balance – adjustments are
made directly to the balance; the Bank Statement – where adjustments are made to the bank
statement balance; and the Balance Sheet Method – reconciling discrepancies between the bank and
book balances.

5. How o en should you reconcile your bank account?

Reconciling your bank account should be done monthly to catch discrepancies early and keep financial
records accurate. Businesses with high volume of transac ons must reconcile their bank statements
weekly or daily to manage cash flow efficiently.

6. What is Deposit in transit?

Deposits in transit are amounts that have been received and recorded by a company but have not yet
been recorded by the bank. These deposits are typically checks or cash that the company has received
and logged in their accoun ng records but are s ll on their way to the bank or are being processed by
the bank. They are also known as outstanding deposits.

7. What is What is Interest income?

Interest income is the revenue earned by an en ty from its interest-bearing financial assets, such as
savings accounts, cer ficates of deposit, bonds, or other investments. This income represents a return
on the invested funds and is typically accrued over me based on the terms of the investment.

8. What are Bank collec ons?

Bank collec ons involve a bank ac ng as an intermediary to collect payments on behalf of its
customers. This service is essen al for businesses that receive payments through various channels and
need efficient methods to process and reconcile these payments.
9. What are Outstanding Checks?

Outstanding checks are checks that have been wri en and recorded in the company's books but have
not yet cleared the bank. These checks are considered outstanding because they have not yet been
cashed or deposited by the payee, and thus have not been reflected in the bank's records. Outstanding
checks are a common reconciling item when performing bank reconcilia ons.

10. What are Service Charges?

Service charges are fees charged by banks for various services they provide to account holders. These
charges can include fees for account maintenance, transac ons, overdra s, wire transfers, and other
banking services. Service charges must be recorded in a company’s accoun ng records and are usually
iden fied as a reconciling item during the bank reconcilia on process.

11. What is NSF (Non-Sufficient Funds) Checks?

NSF (Non-Sufficient Funds) checks, also known as bounced or returned checks, occur when a check is
wri en for an amount greater than the available balance in the payer's bank account. When a bank
receives an NSF check, it does not process the payment and returns the check to the depositor, o en
with a fee. NSF checks require careful handling in a company's accoun ng records to ensure accurate
financial repor ng and bank reconcilia on.

12. Tell Me What Are the Important Things to Be Remembered While Preparing a Bank
Reconcilia on Statement?

Bank Reconcilia on Statement is prepared either by star ng with the Bank pass book balance or Cash
book balance.

If the balance of the Cash book is taken as a star ng point, then Cash book balance is to be adjusted
in accordance with the entries passed in the Bank pass book and vice versa. For example: If the balance
is taken as per the Cash book, then the following items will be added.

Cheques issued but not presented for payment.

Amount credited in Passbook but not in Cash book.

Deposits made in the bank directly.

Wrong credits given by bank.

Interest credited in the Passbook.

13. What Items Will Be Subtracted While Preparing a Bank Reconcilia on Statement?

Cheques deposited but not cleared

Interest/Bank Charges debited by bank

Direct payments made by bank not entered in Cash book

Cheques dishonoured not recorded in cash book

Wrong debits given by bank

If it is prepared with the Bank balance as per the bank passbook, then the above procedure will be
reversed

i.e. the items will be added to the pass book which were deducted from the cash book balance and
those items will be deducted from the bank pass book balance which were added to the cash book
balance.

14. What are the important documents used in BRS?

1. Bank Statement
2. Cash Book
3. Cancelled Checks
4. Check Register
5. Bank Deposit Receipts
6. Withdrawal Slips

15. What is the SLA for BRS?

Service Level Agreement (SLA) for BRS is Turn Around Time (TAT) to be Completed within 5 Business
Working Days a er the Month End Close. (depends upon the process).

16. How many BRS will you do per day?

Per Day 40 BRS. (depends upon the process).

17. What are the Journal Entries in BRS?

1. Outstanding Checks:

When checks issued by the company have not yet been presented to the bank:

Debit: Outstanding Checks (or Accounts Payable, if not previously recorded)

Credit: Bank Account

2. Deposits in Transit:

When deposits made by the company have not yet been recorded by the bank:

Debit: Bank Account

Credit: Deposits in Transit (or Accounts Receivable, if not previously recorded)

3. Bank Charges and Fees:

When the bank charges fees for services or transac ons:

Debit: Bank Service Charges (Expense)

Credit: Bank Account

4. Interest Earned:

When interest is earned on the company's bank account:

Debit: Bank Account

Credit: Interest Income (Revenue)

5. NSF (Non-Sufficient Funds) Checks:

When checks received by the company bounce due to insufficient funds in the payer's account:

Debit: Accounts Receivable (or Customer's Name)

Credit: Bank Account

6. Errors:

When errors are iden fied in the bank statement or the company's records:

Debit/Credit: Bank Account (or Cash Book Account)

Credit/Debit: Relevant Account (depending on the nature of the error)

7. Reconcilia on Adjustment:

To adjust the company's cash book balance to match the adjusted bank balance:

Debit/Credit: Cash Book Account (to increase or decrease the balance to match the adjusted bank
balance)

Credit/Debit: Bank Account

Example:

Suppose the bank statement balance is $10,000, the cash book balance is $9,500, and a er
reconcilia on adjustments, the adjusted bank balance is $9,800. Here's the journal entry to adjust the
cash book balance:

Debit: Cash Book Account ($300 increase to match the adjusted bank balance)

Credit: Bank Account