When it comes to bank reconciliations, should the deposits match what’s reflected in the bank account, or should they be detailed by each individual transaction?
A new controller has joined our team and believes it’s not in line with proper Accounting practices to have bank reconciliations match the bank account balance. They suggest that each transaction should be listed separately. For instance, if I deposit five checks of $100 each at once, the bank will show a single deposit of $500. In my bank reconciliation, I also reflect a deposit of $500, and clicking on it reveals the breakdown of the five checks.
However, the new controller argues that we should record each deposit separately, meaning that it should show as five separate $100 deposits. While the end result will still reconcile with the bank account, this method seems much more labor-intensive and doesn’t accurately reflect the way the bank account is presented.
So, who’s in the right here?
One response
In bank reconciliations, the primary goal is to ensure that the cash balance in your Accounting records matches the balance reported by the bank. While both approaches you’ve mentioned will ultimately reconcile the account, the more efficient method is typically to match the deposits as they appear in the bank statement.
Here’s a breakdown of the two perspectives:
Your Approach:
– By recognizing the total deposit of $500 (reflecting the aggregate amount deposited) in your bank reconciliation, you’re simplifying the process.
– Since each cheque is individually detailed in the deposit documentation, there’s transparency and the capacity to trace back to individual transactions if needed.
– This method aligns with how the bank summarizes deposits, making it more straightforward and less cumbersome to manage.
New Controller’s Approach:
– The controller’s argument seems to lean towards a more granular approach, emphasizing detailed tracking and visibility.
– This method could provide more insight into individual transactions but increases workload significantly without necessarily improving the overall reconciliation process.
– It may be rooted in a desire for stricter compliance or internal controls, but it may not be practical for every scenario.
In practice, many businesses choose to record deposits in the aggregate for efficiency, especially when dealing with multiple cheques at once. As long as you can substantiate the total deposit through your record-keeping (like deposit slips or transaction reports), your method is sound and widely accepted.
Ultimately, it might be helpful to discuss the reasoning behind the controller’s approach and see if there’s an internal policy or framework driving this change. If not, it may be worth considering a compromise that satisfies both the need for accountability and efficiency.