A Step-by-Step Guide for Philippine Businesses in 2026
Published Date: January 12, 2026
Published By: Jac Cantos, Upcloud Accounting
One of the most important financial controls a company can implement is the bank reconciliation process!
Bank reconciliation helps identify discrepancies between balances in the bank account and accounting books, uncovering mistakes, oversights, and even fraud.
If you have any role in running or managing a company, you should know how the bank reconciliation process works and why it’s so important for your finances.
Here’s a step-by-step guide to performing a bank reconciliation, along with best practice tips.
What is a Bank Reconciliation?
Bank reconciliation matches book credits with bank withdrawals, and book debits with bank deposits, reconciling any differences between the bank statement and the books of accounts.
Reconciliation also helps determine how much cash a business actually has at a point in time.
Bank reconciliation is a key financial control for a company to put in place.
What System to Use for Bank Reconciliations?
Companies have two choices:
The Traditional Way: Entering data into spreadsheets and manually matching books and bank records.
The Modern/Progressive Way: Using cloud accounting solutions to automate the process. Financial data is hosted on remote servers ("the cloud"). Modern online accounting solutions process data, identify discrepancies, and generate a bank reconciliation statement.
If your company already uses cloud accounting, some of the steps below may be automated. It will depend on the capabilities of your cloud accounting software. At Upcloud Accounting, we generally use Xero and QuickBooks Online to provide the best service for our clients.
Automated bank reconciliations are one of the reasons why cloud accounting can save your business time and money.
Let’s get started on the process!
Step 1. Collate All Relevant Documents
The first step is to find and collate all relevant and necessary documents:
A. Book Records
Books of accounts: Key to bank reconciliations, recording business transactions.
Cash Receipts Journals/Cash Disbursement Journals: Part of the books of accounts, recording cash payments and cash receipts.
Ledgers: Show the transactions and running balance of a particular account.
B. Bank Records
Passbooks: A booklet where banks print client's bank transactions.
Bank Statements: The digital version of the passbook.
Checkbook: Contains check stubs from previously issued company checks.
Bank Loan Schedules: Required for reconciling items relating to company loans.
Step 2. Identify the Key Information
Identify the information in each document that will enable you to perform the bank reconciliation:
Book debits
Book credits
Bank withdrawals
Bank deposits
Enter or upload this information to your accounting system (manual or online).
Step 3. Match Cash Ledger Credits with Bank Withdrawals
Match cash ledger credits with bank withdrawals. Every withdrawal from the company’s bank account should have corresponding transactions in the company’s books.
What if there is a withdrawal recorded in the books but no bank withdrawal?
Outstanding or unreleased checks: Issued but not yet presented for payment.
Cancelled checks: Cancelled but not yet recorded in the books as cancelled.
What if there have been bank withdrawals but no corresponding book entries?
Delayed entries: Checks or cash payments already issued but not yet posted to the books.
Bank charges: Example: checkbook charges.
Bank loan interests: Interest payments incurred on bank loans.
Withholding tax on interest on deposit: Tax withheld by the bank from the interest income on a client’s deposit account.
Step 4. Match Cash Ledger Debits and Bank Deposits
Match cash ledger debits with bank deposits.
What if there are cash ledger debits that have no corresponding bank deposits?
Deposits in transit: Recorded in the books but not yet deposited in the bank.
Cancelled deposits: Have been cancelled but not yet recorded as cancelled in the books.
What if there are bank deposits that have no corresponding cash ledger debits?
Deposited but not yet recorded: Cash already deposited but not yet recorded in the books.
Withholding tax (WT) on bank loan interest: Interest earned by banks for loans made to clients are subject to tax.
Release of bank loans: Loan monies entering the company bank account that have not yet been recorded in the books.
Interest income on cash balance: Interest payments received from the bank and not yet recorded.
Stale checks: A check that reverts back to the books and still remains payable if the check has not been cashed within a certain period of time.
Step 5. Investigate Book Reconciling Items
Check for any oversights, errors, or mistakes that should be recorded in the cash ledger books.
Reconciling items to be added to the book balance: cancelled checks, deposited but unrecorded checks, final withholding tax on bank loan interests, bank loan monies.
Reconciling items to be deducted from the book balance: bank charges, bank loan interest, checks or cash payments that were already given to a payee but are not yet posted to the books.
There may also be accounting errors that have to be reconciled within the book balance.
Investigate and resolve any errors or mistakes without delay!
Step 6. Investigate Bank Reconciling Items
After matching, separate all oversights, mistakes, or errors that need to be listed as necessary adjustments to the bank balance.
Reconciling items to be added to the bank balance: A bank error in relation to a withdrawal.
Reconciling items to be deducted from the bank balance: A bank error relating to a deposit.
Watch out for internal company errors, or maybe even fraud! Investigate and resolve ASAP!
Step 7. Generate a Bank Reconciliation Report
You should now know the items that have to be added or deducted from the bank account, cash account, and other book balances.
Generate and print a report that identifies the status of the bank balance, the specific items that have resulted in differences, how they have been resolved, and any remaining differences that have yet to be reconciled.
a. Prepare/generate your spreadsheet with three columns (online accounting solutions can pre-generate this template and pull data from your accounts):
Name of the reconciling items
Adjustments or amounts relating to the accounts across the books
Adjustments or amounts relating to the bank balance
b. On the top row, input the unadjusted book and bank balances.
c. On the subsequent lines, input all deposits in transit and any outstanding checks.
Deposits in transit should be added to the bank balance.
Outstanding checks should be deducted from the bank balance.
d. On the next lines, input all other reconciling items identified in Steps 5 and 6.
Your bank reconciliation report is now complete. It is proof that your accounts have been reconciled and should be maintained by a company.
Bank reconciliations can be complicated. Upcloud Accounting is an outsourced provider of accounting, bookkeeping, and tax compliance services in the Philippines. We can help your company with bank reconciliations in addition to the full range of accounting, tax, and finance services. Contact us today for a free consultation.
Upcloud Accounting: Virtual Outsourced Accounting and Bookkeeping Services in the Philippines
Upcloud Accounting offers accounting, bookkeeping, tax compliance, and business licensing services specializing with startups and SMEs in the Philippines.
Our goal is to increase efficiency, automation, and transparency across the accounting and finance functions of our clients with our cutting-edge technology. If you want to move your company’s finance function online, contact our Team of Expert Accountants and Bookkeepers directly via [email protected] or visit www.upcloudaccounting.comto learn more about how Upcloud Accounting accounting services can support your PH business!
Disclaimer: This article or blog is only for general knowledge and guidance and is not a substitute for an expert opinion. For technical advice, please consult your tax / legal advisor for your specific business concerns. For comments, suggestions, and feedback, feel free to email us at [email protected].
