Bank Reconciliation in UAE

What Is Bank Reconciliation?

Bank reconciliation is the comparison between the bank statement and the bank account recorded in the accounting books. The differences are identified, explained, and then missing entries or incorrect entries are corrected.

The purpose is not only to reach a matching balance. The purpose is to confirm that every bank movement has an invoice, document, entry, customer, supplier, or clear reason, and that every book entry has appeared in the bank or is still outstanding due to timing.

A proper bank reconciliation helps management know the actual available cash, follow up customers, monitor suppliers, and identify errors, duplication, or unexplained transfers.

When Does a Company Need Bank Reconciliation?

Common Reasons for Bank Differences

Bank differences may be normal timing differences, or they may be serious errors, duplications, or unexplained movements. For this reason, a “bank difference” should not be left without analysis.

• Issued cheques not yet cleared.
• Received cheques or receipts not yet appearing in the bank.
• Bank charges or commissions not recorded in the books.
• Bank interest, finance charges, or account fees not recorded.
• Transfers between company bank accounts not matched in the other account.
• Card collections received net of bank or card processing charges.
• Payment gateways or collection apps not matching sales reports.
• Duplicated entries or amounts recorded twice.
• Movement recorded in the wrong bank account.
• Customer receipt recorded as revenue instead of customer balance settlement.
• Supplier payment recorded as an expense instead of supplier balance settlement.
• Foreign exchange differences on international transfers.
• Incorrect opening balance from a previous year.

Accounts That Need Reconciliation

Reconciliation is not limited to the current bank account. Any account or payment channel connected with collections or payments should be monitored and matched.

• Company current accounts.
• Savings or deposit accounts.
• Loan or bank finance accounts.
• Company credit card accounts.
• POS machine accounts.
• Online payment gateways.
• E-commerce collection accounts.
• Foreign currency bank accounts.
• Local and international transfers.
• Issued and received cheques.

POS and Card Payment Reconciliation

Many companies depend on bank cards, POS machines, or online payment gateways. In these cases, recording total sales is not enough because the amount received in the bank is often net of fees, commissions, or settlements.

The sales report should be matched with the POS or payment gateway report, then the net transfer should be matched with the bank statement, and charges, differences, and pending amounts should be recorded.

• Sales report from the system or POS.
• POS machine or payment gateway report.
• Net amounts transferred to the bank.
• Card charges or commissions.
• Pending or delayed amounts.
• Refunds or returned transactions.
• Differences between sales and bank deposits.
• Accounting entries for charges and settlements.

Transfers Between Bank Accounts

When the company has more than one bank account, transfers between accounts should be recorded clearly. An amount may appear as an outgoing transfer from one account and appear in the other account on a different date or may be missing from the books.

Every transfer between two company accounts should have a clear double entry, and it should not be treated as revenue or expense.

• Transfers between company accounts in the same bank.
• Transfers between different banks.
• Transfers from AED accounts to foreign currency accounts.
• Bank transfer charges.
• Foreign exchange differences on transfers.
• Transfers between the company and partners or related parties.
• Matching outgoing and incoming dates between accounts.

Issued and Received Cheques

Cheques are one of the main causes of bank differences because a cheque may be recorded in the books when issued or received, but it appears in the bank statement later when cleared or deposited.

A cheque schedule should show cheque number, date, customer or beneficiary, amount, clearing or deposit date, and current status.

• Cheque number and date.
• Customer, supplier, or beneficiary name.
• Cheque amount.
• Date recorded in the books.
• Date appearing in the bank statement.
• Outstanding cheques.
• Returned cheques.
• Cancelled or replaced cheques.
• Linking the cheque with the invoice or contract.

Effect of Bank Reconciliation on Customers and Suppliers

Every customer receipt or supplier payment should be reflected in the correct customer or supplier account. If bank movements are not linked to invoices, customer and supplier balances may be incorrect even if the bank itself is reconciled.

A customer may still appear as owing money even though payment was received, or a supplier may still appear as unpaid even though payment was made, simply because the bank movement was not recorded against the correct account.

• Linking every receipt with the customer invoice.
• Linking every payment with the supplier invoice.
• Settling advance payments.
• Correcting receipts recorded as revenue instead of customer settlement.
• Correcting payments recorded as expenses instead of supplier settlement.
• Following up unknown receipts.
• Matching customer and supplier statements with bank movements.

Bank Reconciliation and VAT

Bank reconciliation does not determine VAT by itself, but it helps confirm that sales, purchases, receipts, and payments are supported by invoices and documents.

When reviewing VAT, the company should not rely only on the bank because VAT depends on invoices, supplies, and the tax period, not only the date money entered or left the bank.

However, if the bank is not reconciled, VAT review becomes weak because some invoices may be missing, some receipts may not be linked to invoices, and some payments may not have valid tax invoices.

• Matching sales receipts with sales invoices.
• Matching supplier payments with purchase invoices.
• Identifying unrecorded sales or purchases.
• Identifying expenses that do not have tax invoices.
• Reviewing bank charges, card charges, and service invoices.
• Preparing a supporting document file for VAT filing.

Bank Reconciliation and Corporate Tax

Corporate Tax depends on correct profit, and correct profit cannot be identified if bank movements are not reconciled or if receipts and payments are not classified properly.

Bank reconciliation helps identify unrecorded expenses, unrecorded revenue, personal payments, loans, advances, shareholder accounts, and transfers between related companies.

• Identifying unrecorded revenue.
• Identifying unrecorded expenses.
• Separating company expenses from owner personal expenses.
• Following up loans, advances, and shareholder accounts.
• Matching payroll, rent, and operating expenses.
• Classifying related party transfers.
• Preparing accurate figures for financial statements and Corporate Tax.

Documents Required for Bank Reconciliation

• Bank statements in PDF or Excel format.
• Bank ledger from the accounting system.
• Sales invoices and collection receipts.
• Supplier invoices and payment vouchers.
• POS or payment gateway reports.
• Issued and received cheque schedules.
• Bank transfer advices.
• Bank and card charge details.
• Loan or finance statements, where applicable.
• Customer and supplier statements.
• Payroll and recurring payment reports.
• Previous entries or opening balance details.

Steps to Perform Bank Reconciliation

• Identify the reconciliation period.
• Obtain the bank statement and bank ledger from the books.
• Match opening balances.
• Match every bank movement with an entry or invoice.
• Identify bank movements not recorded in the books.
• Identify book entries that did not appear in the bank.
• Analyse outstanding cheques and transfers between accounts.
• Record bank charges, card charges, interest, or account income.
• Correct duplicated or wrong entries.
• Link receipts and payments with customers and suppliers.
• Prepare a report of differences and final adjustments.
• Provide recommendations to avoid repeated differences.

Common Mistakes in Bank Reconciliation

• Reconciling the closing balance only without reviewing every movement.
• Recording receipts as revenue without linking them to customers.
• Recording payments as expenses without linking them to suppliers.
• Missing bank charges or card charges.
• Not following up outstanding or returned cheques.
• Duplicating transfers between accounts.
• Treating internal transfers as revenue or expenses.
• Ignoring opening balance differences from a previous year.
• Ignoring foreign exchange differences in foreign currency accounts.
• Not keeping transfer or payment evidence.
• Doing bank reconciliation only at year-end instead of monthly.
• Preparing VAT or Corporate Tax before completing bank reconciliation.

Reports You Receive After Reconciliation

• Bank reconciliation report for each bank account.
• List of unrecorded bank movements.
• List of outstanding movements.
• Issued and received cheque report.
• Bank and card charge report.
• Transfers between accounts report.
• Receipts not linked with customers.
• Payments not linked with suppliers.
• Required correction entries.
• Recommendations to improve control over banks and collections.

Who Needs Bank Reconciliation Service?

• Companies with more than one bank account.
• Companies with card or POS sales.
• E-commerce businesses using payment gateways.
• Companies dealing with cheques.
• Companies with many customer and supplier accounts.
• Companies with old unexplained bank differences.
• Companies that have not closed their accounts for several months.
• Companies preparing for VAT or Corporate Tax filing.
• Companies preparing for audit or financial statements.
• Companies correcting accounts before expansion or admitting a partner.

How Can Al Basma Help with Bank Reconciliation?

Al Basma reviews bank statements and accounting ledgers, then matches every movement with the related invoice, entry, customer, or supplier and identifies the differences and their causes.

We prepare the required correction entries, link receipts and payments with the correct balances, and review POS, payment gateways, cheques, and transfers between accounts.

We also prepare a clear report showing differences, outstanding movements, and recommendations so the accounts become ready for monthly reporting, VAT, Corporate Tax, and financial statements.

Services Related to Bank Reconciliation

Why Choose Al Basma for Bank Reconciliation?

• Match every bank movement with the entry, invoice, customer, or supplier.
• Identify old differences, outstanding items, and unexplained movements.
• Correct bank entries, transfers, charges, and card settlements.
• Link receipts and payments with customer and supplier balances.
• Prepare supporting files for VAT, Corporate Tax, and financial statements.
• Provide a clear report with differences, recommendations, and required entries.

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