The bank reconciliation tie-out
Part of the Close plan.
The bank tie-out does two things for each GP checkbook, as of the date you pick.
1. Proves the last reconciliation again
It takes the checkbook's last completed bank reconciliation on or before the date and checks it against the checkbook transactions:
statement balance + deposits in transit − outstanding payments = book balance at that date
A difference means something dated on or before that reconciliation was added, changed, voided or un-cleared afterward.
The reconciliation comes from GP's reconciliation history when GP has it. Some companies don't: GP keeps only the checkbook's last reconciled date and statement balance. Then that's used, and the "From" column says so.
2. Ties each checkbook to the GL
Each checkbook's book balance as of the date is GP's current checkbook balance less everything dated after the date. Checkbooks that share a GL cash account are added together and compared with that account's GL balance, then with unposted GL entries taken into account. A difference usually comes from bank transactions posted straight to the cash account, deposits dated differently in the checkbook and the GL, or the GL's beginning balance.
The first of those is broken out for you: general journal (GJ) entries to the cash account since the last year-end close are listed, and the summary shows the difference left once they're taken out. Each one is in the GL but has no checkbook transaction behind it, unless the same amount was also entered in the checkbook. Entries from years already closed are inside the GL's beginning balance and aren't listed.
Signs
Ledger Doctor takes each transaction's effect from its type, not just its stored amount. Deposits, receipts, increase adjustments, income and incoming transfers raise the balance; checks, withdrawals, decrease adjustments, expenses and outgoing transfers lower it. A check stored as a negative amount therefore raises the balance, which is what it really does in GP. Check C41 calls such items out.
The sheets
- Bank summary: each checkbook's difference at its last reconciliation, then each GL cash account.
- Bank checkbooks: one line per checkbook, from GP's balance through the reconciliation proof to the bank balance it implies as of the date.
- Bank items: the transactions behind it: outstanding at the last reconciliation, activity since, activity after the date, and not cleared as of the date.
- Bank GL accounts, Bank unposted GL and Bank GL journal entries (the general journal entries to the cash accounts).