Bank Reconciliation with Tally

Bank Reconciliation in Tally

The Bank Book shows all transactions with the Bank. The Banker also keeps a ledger account of the transactions with its customer (called Pass Book). The Bank Book and the Pass Book contains same transaction details. So, ideally, the Bank Book Balance and Pass Book should match.

Even after entering all transactions with bank correctly, you may find that the Closing Balance of your Bank Book does not tally with the Bank Pass Book. This may happen due to various reasons.

Float Time : When you issue Cheque to any Party, you credit Bank’s Ledger (in your books) on the date of issue, but normally it is not debited in the Bankers Books (i.e., in your account) on the same date. Similarly, when you deposit a cheque into your Bank Account, you debit Bank’s ledger on the date of deposit, but it is normally not credited by your Bankers on same date. So, the Bank Balance as per your books and Bank Balance as per Bank Pass Book normally differs. You need to track that all the transactions entered in your books are also reflected in your Banker’s books.

Direct Entry at Bank : Apart from that, Bank may charge Interest, Bank Charges, debit / credit for Interest, Standing payment instructions etc. Similarly, There may be direct collection by Bank / Direct credit into Bank Account. These may not have been entered in Bank Book and are traced at the time of Bank Reconciliation.

Bank Reconciliation is the process of matching the entries between Bank Book & Pass Book) with Bank Pass Book) and tracing the unmatched entries in either of the books (Bank Book or the Pass Book), It is essential to ensure correctness of Bank Accounts.

The main reason of the reconciliation arises due to difference in balance caused by the time gap between debit and credit entries in the books of drawee and drawer bank, due to the time to get the money moved from one bank account to another bank account (called Float Time). As electronic banking spreads, the Float Time will minimize as these transactions get instantly reflected simultaneously in both the drawee & drawer bank accounts. In such case, the bank book and bank statement will mostly tally.

However, due to direct transfers in the Bank Account through electronic modes, and other kind of entries directly into Bank Pass Book (Interest, Bank Charges etc), Bank reconciliation would be necessary to trace such entries.

Bank Reconciliation process in Tally

Bank Reconciliation is the process to reconcile the apparent differences between the Bank Pass Book balance (balance as per the banker) and Bank Book balance (balance as per your books of accounts). Bank Reconciliation process ensures that the numerical figures of bank ledger account (Debit Amounts & Credit Amount) are in agreement with the Bankers Account.

An entry for Bank transaction will be reflected in Bank’s Pass Book (Banker’s ledger account for its customer’s account), when the transaction passes through the Bank. So, for an entry in Bank Book, the Bank Pass would also show a corresponding entry.

Bank Reconciliation is the process to find out the one way entries in either of these books (Bank Book or Pass Book) which remained unmatched in the other counterpart book, normally due to time lag (float time) between the transactions at both ends (customer & bank), or entries missing at the other end.

Bank Reconciliation is done by matching the entries in both the books to filter out the rest entries (unmatched entries). The entry of Voucher (Bank Book) is matched with the Pass Book (Bank Statement). In the matched entries, the date of clearance in the Pass Book is recorded. Untagged (Undated) items can then be traced to compile the Reconciliation Statement.

Banks Reconciliation Modes in Tally

Tally ERP.9 provides 2 modes of Bank Reconciliation :

Manual Bank Reconciliation : In this process the Bank Pass Book date is marked into the respective voucher for Reconciliation. It is a tedious & time consuming process for organisations having vast banking transactions.
Auto Bank Reconciliation : In this process, the e-Bank Statement (in digital from) is imported, from which entries are matched by Tally ERP 9 and Bank Reconciliation is prepared. This is possible only for selected Banks which provides import of Bank Statement in compatible form.

We first discuss about Manual Process and then will explain the Auto Reconciliation in next chapter.

Bank Reconciliation Screen in Tally

You make Bank Reconciliation at Bank Reconciliation screen, which you may access in the following ways, from :

Banking Menu : At Gateway of Tally, select Banking > Bank Reconciliation and select a Bank Account from the list
Bank Ledger Account: Select Display>Account Books>Ledger, select the Bank Ledger Account and click F5:Reconcle button at Ledger Account of bank to get Bank Reconciliation screen.
Cash Book : Select Display > Account Books > Cash Bank Books, select a Bank Ledger (Click F1: Detailed if required, to get Bank Ledgers displayed), to get Ledger Monthly Summary. At Ledger Monthly Summary, select a month (for which you like to make Bank Reconciliation) to get Ledger Vouchers showing the list of Vouchers related to the selected Bank. Click F5: Reconcile button to get Bank Reconciliation screen

Bank Reconciliation Opening entries in Tally

When you start accounting in Tally from a date when there are some unreconciled entries on Books Beginning from date, you have to create unreconciled entries relating to period prior to books beginning date, at Opening Reconciliation screen

Entries in Opening Reconciliation need to be created in the following cases:

Opening Entries : You start Accounts in Tally of an existing company, which has some unreconciled bank entries, at the start of Books Beginning from date, related to the period prior to Books Beginning from date
BRS from Mid Year : You activate BRS feature from middle of Financial Year, and there are some unreconciled entries on Books Beginning from date
Accounting from Mid Year : You start Accounting in Tally from middle of Financial Year

Start Date of Bank Reconciliation : For each Bank Account, you have to enter the Start date of Bank Account. It is presumed that all bank entries prior to that date have been reconciled. You should not enter any instrument prior to the Start Date. It may be from or after Book Beginning Date (as specified in Company creation screen) if you start Bank Reconciliation from middle of the Financial Year (the Books Beginning Date is later than Financial Year Start Date).

To enter the Start date of Reconciliation for each Bank Account, at the respective Bank Ledger Account Creation/ Alteration , at the field Effective Date of Reconciliation, enter the Start Date of Bank Reconciliation (normally the first date of Opening Bank Reconciliation entries

Bank Reconciliation Opening entries screen in Tally

At Bank Reconciliation screen, click U: Opening BRS button to get the Opening BRS screen

BRS Opening entries in Tally

Now enter the data for Opening BRS, at the respective columns as follows:

Date : Enter the transaction Date at Date field. This must be prior to the Date of Effective Bank Reconciliation Date, as entered in the respective Bank Ledger Account Master
Particulars : Enter the brief Particulars of entry / Instrument Number for memorandum. This will facilitate identification & reconciliation of the entry at a later stage.

Opeing BRS details entry in Tally

Nature of Transaction : Select as follows:
○ Withdrawal : For amount withdrawn from Bank. You get a subscreen to select the respective Cheque Book from the list
○ Deposit : For amount deposited into Bank.

Transaction Type : Select the appropriate Transaction type (Cheque/ DD etc) from the Transaction Type list. This is only for memorandum and the selection does not affect the reconciliation :
Remarks : Enter Remarks as memorandum of the entry. This will facilitate reconciliation of the entry at a later stage.
Amount : Enter the transaction amount in Debit / Credit columns as follows:
○ Debit : In case of Deposit ( i.e Bank Account Debit in Bank Book / Credit in Pass Book
○ Credit : In case of Withdrawal (i.e Bank Account Credit in Bank Book / Debit in Pass Book

The total of both columns and the balance as per Bank Book are shown at the end of the report for reference and quick check up with Bank Book and Pass Book as on Books Beginning Date. Proceed to Bank Reconciliation for current period only after these figures agree to your Bank Book / Bank Pass Book (otherwise you will not get the reconciliation correct)

The entries made in Opening BRS are included in the BRS statement and are reconciled in the same way as regular entries for the accounting period.

Bank Reconciliation Configuration in Tally

At Bank Reconciliation screen, click F12: Configure to get Bank Reconciliation configuration screen. Here you can set the options to configure the contents of the Bank Reconciliation screen, as described below :

Bank Reconcilitaion Configuration in Tally

Selection of Voucher : For convenience of operation, you may filter the entries for reconciliation as below, by selecting form the list, as follows:

All Vouchers : When you like to match both Debt & Credit Transactions (payment & Receipt Vouchers) simultaneously
Credit Entries only : When you like to match only Credit Transactions (e.g, In Payment Vouchers, & Withdrawals from Bank in Contra voucher, Bank Account is Credited).
Debit Entries only : When you like to match only Debit Transactions (e.g In Receipt Vouchers & Deposits to Bank, Bank Account is Debited).

Ledger Entry Types Selection in Tally

Voucher Narration : Set Yes at Show Narrations also to see the Voucher Narrations also.
Voucher Remarks : Set Yes at Show Remarks also to see the Voucher Remarks also. This may be useful to facilitate matching of records
Reconciled Transactions : Set Yes at Show Reconciled Transactions also to show the Reconciled entries also, else set No to filter out the reconciled entries for convenience of matching
Back Dated Reconciliation : Set Yes at Allow back dated Reconciliation to get the unreconciled entries earlier than the current period, to reconcile older entries also. Else set No to filter out the entries for convenience of reconciliation of vouchers of current period only
Payee / Payer’s’ Name : Set Yes at Show Payment favouring / Received From to show the Payee / payer’s name. This is quite helpful to quickly identify the entries for matching as the Payer’s / Payee’s Name is normally mentioned in Bank Pass Book.
Difference in Bank Balance : Set Yes At Difference in Bank Balance to show the difference in Balance as per Bank (Balance as per Company Bank Book) and Balance as per Imported Bank Statement (balance displayed in imported bank statement . Set No the Difference figure will not be shown
Unreconciled transactions : Set Yes at Show all unreconciled transactions till date to show older unreconciled entries (irrespective of From Date specified at Bank Reconciliation Statement) also (to help reconciliation of earlier unreconciled vouchers).

Unlinked Transactions : Set Yes at Show all unlinked transactions (Amount not reflected) to link all transactions under Amount not reflectedin Company Books with a single click.

Bank Reconciliation Buttons in Tally

The following buttons are available at Bank Reconciliation screen

Bank Reconciliation Button bar

B:Bank Reconciliation : To get Bank Reconciliation screen
S: Set Bank Dates : To quick post a single Date at Bank Date column of all the records at a time,
C; Create Voucher : To create a Receipt / Payment / Contra voucher from within the Reconciliation screen. It is useful to create voucher for the corresponding missing entries on the other end.
U: Opening BRS : To make Opening BRS entry
B: Bank Statement : To Import (or just view) Bank Statement from Bank’s site
R: Reconcile Unlinked : To Reconcile Unlinked (pending) entries
R: Reconcile All Unlinked : To Reconcile all Unlinked (pending) entries in one step

Deleting Unlinked Entries : AtHorizontal Button Bar, appearing at the bottom of the Bank Reconciliation screen, you may click D: Delete Unlinked to delete the selected Unlinked entry, Click D: Delete All Unlinked to delete the selected Unlinked entry.

Bank Reconciliations operation Button bar in Tally

Bank Date Entry for Bank Reconciliation in Tally

Through this process, the entries for which the bank transaction has been cleared by the bank (the matched entries) are marked.

At Bank Reconciliation screen , the vouchers for which the Bank Date has not been filled up (unmarked entries till the last date of the current month) are listed. Now enter the Date of clearing (referred as Marking of entries) of the cheque as per Bank Statement (Bank Pass Book) at the blank Bank Date field against the voucher record. After entering Bank Dates (marking) for the respective entries, press Ctrl+A to save.

Quick Entry of Bank Date : If you have to enter same Date at Bank Date field in all the entries in the screen (if all the entries have been cleared through Bank Pass Book on the same date), you may click S; Set All Dates button, enter the Date of clearing and press <enter>. The Date entered will be posted in the Blank Bank Date column of all the records in the screen

Bank Date entry in Bank Reconciliation in Tally

At the bottom, you get the following figures as per entry of Bank Date.

Amounts not reflected in Bank: The total figures of unreconciled entries (total amount of Debit and Credit entries against which Bank Date has not been marked) are displayed here.
Balance as per Bank: This shows the net effect of Balance as per your Books offset by the Amounts not reflected in Bank. Arithmetically this should be the balance in the Bank Statement (Pass Book).

Pending Bank Reconciliation Entries in Tally

If the Balance as per Bank in the Reconciliation Statement does not match with the pass book balance, there is a possibility of some bank transactions (Direct collection / payment by Bank, Bank Charges, Interest etc) that have not been incorporated in Bank Book. Find out the entries that are appearing in Bank Statement but not in your books (e.g, Interest, Incidental Charges, Collection Charges debited by Bank). Make such entries in your Books and then enter the Bank Date as stated to get the matched balance.

The Bank Reconciliation process helps you to mark and trace unmarked entries in Bank Book, but cannot readily trace the entries that have been passed by Bank (appearing in Bank Pass Book) but not yet incorporated in the Bank Book. This is only one way process of Reconciliation (half reconciliation).

To make the full reconciliation, it is advisable to tick (mark) the matched entries in Bank Pass Book also at the time of marking the Bank Book entries in the Bank Reconciliation screen. This will help you to trace the entries in Bank Pass Book which remained unmarked.

New Voucher Entry from Bank Reconciliation screen : Click C:Create Voucher button at the Reconciliation screen to enter the transaction of such missing voucher, through Bank Reconciliation screen, and mark the Date of Pass Book entry in the vouchers

Migrated Banking Vouchers in Tally

When data is migrated from older version of Tally :

The Transaction Type row in the Bank Reconciliation screen will be blank. You may, if required, alter the vouchers and select the appropriate transaction type (Cheque/DD) in the Bank Allocation Table
The Instrument Date displayed in the Bank Reconciliation screen will be the Voucher Date (the reconciliation is based on Instrument Date not on the Voucher date)
The Bank Reconciliation screen lists the transactions on the basis of each transaction type (eg. Cheque, DD etc) selected. A voucher with multiple transaction type will be split and shown for each transaction type

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