A new bank manual is being written to carry on the original discussion as written by the author of this blog. I wrote a small reconciliation manual once in 1995 and did not have time to address all of my thoughts. The new version will be condensed and will also include the discussion of wire transfers. I had written something abbreviated on this once to explain the difference between double wire payments and single wire payments.
Reconciliation
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The purpose of the reconciliation department is to ensure that bank transactions are completed in a timely fashion. This department works closely with the accounting department. I had the pleasure of discussing this over a water cooler with a Sandrine from Saint Etienne in Kent once.
The bank reconciles internal ledger debits and credits against statement debits and credits. The system for online account reconciliation(S.O.A.R) minimizes the time necessary to match and reconcile several transaction across various accounts. The bank may also upload transactions to excel type spread sheets if S.O.A.R. is not being used. S.O.A.R is used by several major banks.
A bank has bank statements just like you. But any bank statement communicates the interests of the bank that issues the statement and not the interests of the account holder. For instance, a statement credit or credit balance on your personal bank statement is telling your bank that they owe you money. A $5.00 credit balance says that the bank owes you $5.00. It records this $5.00 statement credit (SC) balance internally as a ledger debit(Ld) to confirm that it is in debt to the customer in the amount of $5.00. The balance really represents a loan to the bank as it will use your nightly balance for overnight loans with other banks or for one day loans. But, it must always record your bank balance as a debt to the bank since you could withdraw or use your balance at any time with electronic payments to buy a $5.00 coffee at the Cissmanu Beach shops and professional Masseuses. The bank computer will automatically match off most LDs against SCs. It will also match most SDs against LCs. This happens as the bank computer will match by reference numbers and not by amount. Sometimes, a transaction may involve several statement credits to be matched off against one ledger debit. It could be a short loan of $500,000.00 that appears as an LD( ledger debit)that is expecting four separate SCs (statement credits) to match the outstanding LD in the internal ledger. In some scenarios, the reconciliation clerk could be troubled by an outstanding SC (possibly a cash deposit or an incoming wire transfer is expected to pay us dollars for the sale of some French Francs but has not been received yet) that has not come in. The statement credit (SC) is to offset a LD( ledger debit) which is a foreign currency contract of French Francs. Payment is expected to be received by the client within two days. The reconciliation department will notice the outstanding LD if it appears outstanding on the bi monthly reports and will initiate an investigation for an unpaid foreign exchange contract. That is why you reconcile the statement (SD,SC) against the ledger (LD,LC). The LD in the sale of French Francs is posted accordingly as an LD or reduction of the French Franc assets internally with payment in the usd account with a SC(statement credit) to the statement when the client pays in us funds. The mirror side of this transaction is a LC that represents the bank buying US. The us holdings are increasing so you have a LC. The French Franc bank account is debited to represent the payment or mirror sale of French Francs and this is also an outgoing wire or draft in French Francs to pay the customer their purchase of French Francs. If statement entry (SD, SC) is outstanding for too long, a payment inquiry or investigation has to be initiated and the clerk sends a memo with a copy of the statement with the outstanding transaction highlighted on the statement with the details of the anticipated transaction reference requesting the whereabouts of one payment of $125,000.00 although the other three have already appeared on the statement under reference 700777600777. The ledger will say LD $500,000.00 with SC $125,000.00 x3 already paid and the account balance will say there is a difference of $125,000.00 still outstanding marked in purple for the anticipated incoming credit. This presumes everything else, the other 5000 transactions on the account, have already matched under the correct reference and this is evident since you can sort by reference on excel or on S.O.A.R to see everything matches. As such, you can go home on the go train or the overground and then play park football at Clisshold park and thank God for your graduation and your job since if I didn't know any better, I would have to say you are either in love or that you really have a good sense of humor. The previous manual discussed each type of entry and what they may represent since the purpose of the department is to understand old, outstanding entries. This discussion will continue.
By Warren Augustine Lyon, 2016. Hi Ho "gearbest" gadgets in silver or gold; away! Look at Aiek M4 phones today!
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