What is Bank Reconciliation Process?
The bank reconciliation process is the periodic comparison of a company’s cash book balance with the balance shown on the bank statement. Its purpose is to identify timing differences, errors, and unauthorised transactions, so that the cash balance reported in the financial statements is accurate.
How It Works
- Obtain the bank statement and the company’s cash book for the same period.
- Identify outstanding deposits (recorded by the company but not yet by the bank) and outstanding cheques (issued but not yet cleared).
- Adjust the cash book for items appearing in the statement but not in the books (bank charges, interest, direct debits).
- Confirm the adjusted bank balance equals the adjusted book balance; investigate any remaining differences.
Saudi Context
Saudi companies typically reconcile their bank accounts monthly. SAMA-supervised banks provide statements via online banking portals and standardised SWIFT MT940 files for ERP integration. Auditors registered with SOCPA review bank reconciliations during interim and year-end audits.
Example
A Riyadh company’s cash book shows SAR 320,000 while the bank statement shows SAR 340,000. After adjusting for SAR 25,000 outstanding cheques and SAR 5,000 bank charges, both balances reconcile.