General Ledger Cash Account Out of Balance to Statement During Bank Reconciliation

When reconciling a bank account have you ever experienced a GL Cash Account out of Balance to the statement?  Have you wanted to know the difference between the GL cash account and the statement balance?  How can we correct this issue and complete the reconciliation?  We will cover the answers to these questions and more in the article below, please read on!

What are the reconciling items listed at the bottom of the Bank Account Reconciliation Screen?

  • Cleared Deposits:  The number and total amount of deposits marked “Cleared?”
  • Cleared Payments:  The number and total amount of payments marked “Cleared?”
  • Cleared Balance: The difference between the Cleared Deposits and Cleared Payments.
  • Statement Balance:  The amount entered as the statement ending balance for the specified reconciliation period.  This is taken directly from the bank statement received from your financial institution.
  • Out of Balance By:  The difference between the Cleared Balance and the Statement Balance.
  • GL Cash Account(s) out of balance to the Statement by:  The difference between the Statement Balance and the GL Cash Account balance.

What is the GL Cash Account and how can we determine the balance?

  • This is the ending balance of the cash account in your General Ledger as of the statement date on your reconciliation.  One easy way to find the ending balance is to open the General Ledger module and run a Report > Account Report > General Ledger Report > filtered on the Cash Account for the statement end date.  The balance is comprised of all posted transactions to the cash account and should match the statement ending balance in your reconciliation.  If the ending GL Cash Account balance and the Statement ending balance do not match there will be an out of balance amount appearing on this reconciliation line.

What can cause a GL Cash Account out of balance?

  • Reconciliation Statement date is incorrect.
  • The reconciliation ending balance is incorrect.
  • Checks were created in a different fiscal period than they were voided.
  • Transactions are marked as Do Not Post or have not yet been posted.
  • Outstanding transactions are marked as cleared.
  • Manual journal entries were made to the cash account and not posted or imported to Bank Accounts as an adjustment.
  • Bank adjustments were not created when the journal entry batch was posted to the cash account, so a manual bank adjustment was entered as Do Not Post.
  • Bank adjustment was made to the bank as Do Not Post.
  • Bank adjustment was added twice.
  • If the Bank is set up specifically to track a Credit Card, the statement balance was entered as a positive number instead of a negative number.
  • Debit account on the adjustment is not the cash account.
  • The bank is not set to track cash in General Ledger.

What recommendations can be followed to correct the issue?

  1. Verify the Statement date and ending balance are correct by selecting Reconciliation, Go to Reconciliation Input from the Bank Account Reconciliation menu bar.
  2. Verify the correct transactions are marked as cleared.
  1. Ensure the bank is set to track cash in General Ledger.
    On the Bank tab, verify the account numbers used for Accounts Payable and Cash Management are correct.
  2. Post to General Ledger.
    Post all payments, bank adjustments, and journal entry transactions made to the GL cash account.
    Note: If manual journal entries are made to the GL cash account, and not imported or posted to the bank account as an adjustment, the bank account and cash account will be out of balance.  For entries made to General Ledger but not to the GL cash account, you can post a bank adjustment using the GL cash account as both debit and credit account.  Because the adjustment is already posted in General Ledger, this creates a posted bank adjustment, balancing the reports without affecting the cash account.
  3. Note timing issues.
    If you voided checks in a different month than they were created, the bank account and cash account will remain out of balance until the reversals post to the cash account.

    • For example: If the payment date is in the current reconciliation month, and the post date is in the following month, knowing we will be in balance next month we can reconcile with the GL out of balance.  Next month the GL will be in balance automatically due to the timing.
    • If you must correct this in the current period, and do not want to carry the GL out of balance, you can create an automatically reversing journal entry to your GL cash account.
  4. Determine how you will treat Do Not Post transactions.
    Run a Transaction Register to find transactions marked as Do Not Post.  The bank account and GL cash account will remain out of balance until these transactions are posted to the GL cash account, manual journal entries are posted to the GL cash account or the transaction or adjustment is deleted.
    Note: Only not yet posted bank adjustments can be deleted.
  5. Check the debit account used on adjustments.
    An account other than the cash account used as the debit adjustment account causes the bank account and GL cash account to be out balance.  If the adjustment is unposted, edit the debit account.  If the adjustment is posted, enter another adjustment to correct the original adjustment.

To view a Video Demonstration on troubleshooting a Bank Reconciliation out of balance please follow the steps in Bank Reconciliation shows out of balance to GL Cash Account or vice versa.

What happens if we cannot determine the transaction causing the GL Cash account out of balance to the statement?

  • The bank reconciliation can be completed as long as the register and statement balance.  However the GL Cash account out of balance will roll over to subsequent reconciliation months until the difference is corrected.
  • As a last resort we can create a manual journal entry to correct the issue:
    • Ensure the following Business Rule is enabled:  General Ledger > Configuration > Business Rules > Journal Entry > Mark the box “Allow journal entries to cash accounts without adjusting the bank register”.
    • This setting will allow manual journal entries to be created without simultaneously creating bank adjustments that would affect our register that is currently in balance.
  1. Open a New Journal Entry Batch.
  2. Do NOT mark the box “Create bank adjustments when posting to a banks cash account”.
  3. Create the appropriate journal entry following the below rules:
    • If the bank reconciliation says GL Cash account is out of balance by a (Negative Amount) – then CREDIT the Cash account.
    • If the bank reconciliation says GL Cash account is out of balance by a Positive Amount – then DEBIT the Cash account.
    • Typically the other side of the entry is the mistake or a liability account; however the final decision would be determined by the organization.
  4. Post the Journal Entry.
  5. Switch to Accounts Payable and review the reconciliation – your GL Cash account will now be in balance.

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https://www.blackbaud.com/files/support/kb/kev//BB61184/QueryManualJournalEntry.htm




One Response

  1. I found this to be extremely helpful…thank you.