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Preparing a bank reconciliation

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If you are completing the Sage 50 Practice Set, you are asked to prepare a bank reconciliation of the Checking Account. To assist you with this task, you will be provided with the previous month's bank reconciliation statement (prepared manually) and the current month's bank statement.

Preparing a bank reconciliation statement on a periodic basis is an important cash control procedure. It serves to verify the balance of cash shown on the general ledger against the balance shown on the bank statement. Those two balances are rarely equal owing to both differences in timing in recording transactions and any errors that have been made. The bank reconciliation process can uncover any errors recorded in either the company books or in the bank statements. This topic explains where and how a bank reconciliation is prepared in Sage 50.

Note that this topic demonstrates the process of bank reconciliation if you are using a bank statement that is in hard copy or external to Sage 50. However, if the bank statement provided by the bank is in electronic format and you wish to to import it electronically to Sage 50, the process will differ slightly from the instructions below.

To perform a bank reconciliation in Sage 50, open up the Banking Navigation Center and click the Reconcile Accounts icon.

Select reconcile accounts

The Account Reconciliation window then appears where you can reconcile any cash account in the general ledger. The following screenshot and reference table show step-by-step instructions on how to prepare a bank reconciliation for the Regular Checking Account using the Account Reconciliation window in Sage 50. Note that each step is assigned a reference number to help you identify the appropriate field or icon in the screenshot.

The Account Reconciliation window with reference numbers

The Account Reconciliation window
Step Sage 50
field or icon
Action
1 Account to Reconcile Select the account number of the cash ledger account to be reconciled.
2 Statement Date Click the calendar icon to select the closing date from the bank statement.
3 Statement Ending Balance Enter the final balance of the cash account from the bank statement.
4 Status of cash items Notice that Sage 50 automatically displays a summary of transactions that are recorded in the cash ledger account.

If you are completing the Sage 50 Practice Set, the next step is to review the previous month's bank reconciliation statement. To confirm that outstanding amounts in the previous reconciliation have now appeared on the current month's bank statement, place a check mark next to the amounts shown on both statements.

Next, identify all items that appear on both the current month's bank statement and the Account Reconciliation window in Sage 50. If an item in the status list appears on the bank statement, clear that item in Sage 50 by clicking the box in the Status column for that item/transaction to enter a check mark in that column. Note that you also need to place a check mark next to that item on the bank statement.

To open the Sage 50 window that is used to record the details of a particular transaction, just double click the line item for that transaction. You will then be presented with the Sage 50 window for the transaction that you want to know about. Close that window when you are finished.
5 Arrow icon If you can not see the fields where you enter the interest income and service charges click the double arrow icon to reveal those fields.
6 Interest Income,
Date, and
Account
Type the amount of interest earned as shown on the bank statement. Then, click the calendar icon to select the date the interest income was earned and enter the general ledger account for interest income. Note that Sage 50 will automatically journalize this interest income into the general journal and update the appropriate ledger accounts after you have completed the bank reconciliation process.
7 Service Charges,
Date, and
Account
Enter the amount of service charges incurred as shown on the bank statement. Then, click the calendar icon to select the date the bank service charges were incurred and enter the general ledger account for the service charges. Note that Sage 50 will automatically journalize the bank service charges into the general journal and update the appropriate ledger accounts after you have completed the bank reconciliation process.
8 - Outstanding Checks
+ Deposits in Transit
- GL (System) Balance
Sage 50 then automatically calculates and displays the amounts of the following items:

- Outstanding Checks. This is equal to the sum of checks and bank debits that you have not identified as 'clear' in the Account Reconciliation window (See step 4 above).

+ Deposits in Transit. This is equal to the sum of deposits and bank credits that you have not identified as 'clear' in the Account Reconciliation window (See step 4 above).

- GL (System) Balance. This is equal to the balance of the general ledger account to reconcile.
9 = Unreconciled Difference Sage 50 automatically calculates the unreconciled difference as the statement ending balance minus outstanding checks plus deposits in transit minus the G/L system balance.

If you have completed the bank reconciliation process correctly, the balance of the unreconciled difference should be zero (0.00). If not, check your work again and confirm that you have not made errors when preparing the bank reconciliation and have correctly entered all cash transactions into Sage 50. To achieve reconciliation you may need to contact the bank if you suspect there is an error on your bank statement or you may need to record a correcting entry if you discover an error in your accounts.
10 OK icon Once you have entered the information in the Account Reconciliation window, remember to review your entries and click the OK icon to complete the bank reconciliation. Note that if you previously entered details about the interest income and service charges into the Account Reconciliation window, Sage 50 will post those entries to the appropriate ledger accounts.
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