A bank reconciliation statement is a kind of from that allows an individual or a business to compare the personal bank records and bank column of the cash book of a business to the pass book of the bank in order to expose and resolve any possible inconsistencies. Due to the timings difference between the data entered in the record of the bank and the data stored in the bank column of the cash book of a business there may be an occurrence of discrepancies between the account balances. In order to resolve this discrepancy a bank reconciliation statement is prepared. The goal of the statement is to identify whether the cause of discrepancy is an error of a difference in timings of storing the record.
The cash book of the company maintains all the records of various bank transactions in the bank column of the cash book. These transactions include check written, amount submitted and withdrawal from the bank, customer’s receipts from the banks etc. on the other hand bank also maintains the details of these transactions such as details of company’s deposit, checks, clearance and service charges. The bank posts a pass book of bank statement of the company containing the details of all the transactions. On reception the company must verify the bank statement by comparing it with the bank column of the cash book. The process of comparing and confirming the authenticity and frequency of the transaction is called reconciling the bank statement. The business will prepare a bank reconciliation statement to compare both the bank statement and cash book of the company.
There is no fixed date to prepare a bank reconciliation statement nor it is compulsory for a business to prepare this statement. It can be prepared from time to time in order to tally the bank statement and the records maintain in the cash book of the business. Bank reconciliation statement helps to detect and omit errors and other mistakes that may result in difference between the balance of the company’s account at bank and company’s records in its cash book. If reconciliations are not carried out at frequent interval of time it may results in the loads of work involved in tallying the cash book and the bank statements as there may be hundreds and hundreds of transactions to compare. In most of the organizations reconciliations are not performed manually and firms use specialized accounting software to reconcile the bank statements.
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