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When reconciling my bookkeeping with my bank statement, should I use the date the transaction occurred or the date the bank processed the transaction?

Also, which date should I use when transferring money from one bank account to another? The problem being that the two banks processed the transaction on different days.

For example, if I withdraw €100 from my bank account on 30 September, I have the cash on that day (obviously), but my bank does not process the transaction until 2 October. How should I date the transaction in my own books?

As another example, if I transfer €100 from Bank A to Bank B, Bank A's statement dates the transaction on 20 September, but Bank B dates it as coming in on 22 September. How should I account for that €100 during those two days it's being transferred?

The bookkeeping software that I use doesn't seem to allow for this "transfer time" between accounts. When I enter a transfer from one account to another, they both have to have the same date.

How should I resolve this so I can accurately reconcile my accounts in my bookkeeping software? What's the "proper" way of doing this?

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2 Answers 2

up vote 2 down vote accepted

This seems almost overkill, but if you want to...

I suppose one thing you could do is create a separate money in transit account, similar to Account Payable and Account Receivable. In your bookkeeping, transfer the money from the source account to the holding account on the date that the source bank withdraws it, and then transfer the money to the destination account on the date that the target bank deposits it. This both makes it clear that there is money going between places, and ensures that the daily balance on each "physical" account is accurate.

For cash withdrawals and deposits, I'd just use the date when you make the withdrawal, since that is the day from which the money is available in the new location rather than the old one.

Note: I don't know if this is the "proper" way to do it in a random jurisdiction, but I doubt being this explicit can get you into trouble.

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This is actually the solution that I decided to go with and it looks like it will help keep things in order. From what I've read elsewhere, it looks like the actual transaction date, and not the bank's processing date, is the important one for things like taxes, though I'm still open to being corrected on this. – mtnorthrop Sep 22 '11 at 19:41
It makes sense that the actual transaction date would be what matters for taxes, but if you want an accurate answer to that, you will probably have to specify which jurisdiction you are in. – Michael Kjörling Sep 26 '11 at 7:05

Personally, I use the earlier date in Quicken so that it looks like I lose money earlier. This isn't 100% accurate, but it keeps me from thinking my accounts have more money than they would otherwise have.

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