Bank Reconciliation

What Is Bank Reconciliation?

Bank reconciliation is the process of comparing a company’s internal financial records with its bank statement to ensure that both sets of records are accurate and consistent.

Key Takeaways

  • Definition: The process of matching internal records with bank statements. 
  • Purpose: To identify and correct discrepancies. 
  • Frequency: Typically performed monthly. 

Steps in Bank Reconciliation

  1. Compare Balances: Match the ending balance on the bank statement with the company’s records. 
  2. Identify Differences: Look for discrepancies such as outstanding checks, deposits in transit, and bank fees. 
  3. Adjust Records: Make necessary adjustments to reconcile the differences. 
  4. Document Reconciliation: Record the reconciliation in the accounting records for future reference.

Importance of Bank Reconciliation

Bank reconciliation is essential for ensuring the accuracy of financial records, detecting fraud, and managing cash flow effectively. It helps maintain trust in financial reporting and supports effective financial management.


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