What happens if bank reconciliation doesn’t balance? (2024)

FAQs

What happens if bank reconciliation doesn’t balance? ›

If bank reconciliation doesn't balance, an error of some kind is indicated—be it a numerical mistake, oversight, or duplication, a human error in comparison or adjustment, or a software problem. Companies might choose among several options for addressing the mismatch.

If your reconciliation doesn't balance, adjust the records to account for any missing data. For example, note uncleared checks and adjust the balance until the check clears.

If left unchecked, this can result in unnoticed errors such as double charges, unauthorized withdrawals, or overlooked deposits. Over time, these discrepancies might accumulate, leading to inaccurate financial records and potential overdrafts.

Bank errors can include the bank recording an incorrect amount, entering an amount that does not belong on a company's bank statement, or omitting an amount from a company's bank statement. You should notify the bank of its errors. If you are writing off the bank error, a journal entry or ledger adjustment is required.

You should check the reconciled transactions still match your statement. After you have checked all of the information in this article, the difference should be zero. If the difference is not zero, you may want to unreconcile all transactions and start the process again.

After all adjustments, the balance on a bank reconciliation statement should equal the ending balance of the bank account.

Failing to do so could result in inaccurate financial reporting, which could ultimately damage the business's reputation and financial standing. Furthermore, accurate reconciliation is also crucial in the credit control process to maintain financial integrity and enable effective financial decision-making.

Common issues might include: Expenses that appear on the bank statement but are not recorded in the accounting system. Expenses recorded in the accounting system that don't match the amounts charged as per bank statements (e.g., due to bank fees or errors).

What to do if your bank reconciliation doesn t balance in QuickBooks? ›

The first three steps to finding errors in a bank reconcilation statement involves checking if the beginning balance is equal or not to the prior ending balance, comparing the ending balance with account balance, and verifying outstanding check and deposit totals.

However, in the bank statement, such a balance is showcased as a debit balance and is known as the debit balance as per the passbook. Therefore, an overdraft balance is treated as a negative figure on the bank reconciliation statement.

If you see a 'negative' check in your Select Bank Transactions (ie. "Reconciliation") window, the system is telling you that there is a problem that needs to be reviewed and fixed.

An effective bank reconciliation process can identify any discrepancies in your company's records, and help prevent fraud and theft from your bank account. If you weren't to reconcile your accounts, you could potentially lose a lot of money and any fraud or theft that's happening can be left to continue.

Key Takeaways. Your bank may close your account and send you to collections if you're always in overdraft and/or don't bring your account up to date. An overdraft occurs when your account falls below zero. Your bank will let your account become negative if you have overdraft protection but you may face fees.

If the difference is zero, you've successfully reconciled your account. If the difference is not zero, you may need to review your transactions again to find any discrepancies.

Why is it important to a business? Bank reconciliation is the quickest way to identify any discrepancy between balances. Any unexplained discrepancy could be a sign that a theft or fraud has occurred within the business, and should be thoroughly investigated with all relevant staff members.