Examples Of Bank Reconciliation Statement

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Bank Reconciliation Statement Introduction A bank reconciliation is a process performed by a company to ensure that the company's records are correct with the bank's records. According to accounting-simplified.com, bank reconciliation statement is a statement prepared to compare the bank account balance with the balance stated in the bank statement and reconcile the balance. Accounting Coach explained that the purpose of reconciling the bank statement is to know that the amount of Cash reported by the company (company's books) is consistent with the amount of cash shown in the bank's records. It also serves to detect any discrepancies between the accounting records of the entity and the bank besides those due to normal timing differences. Such…show more content…
However, we will realise that most of the time the bank statement balance is not the same as the bank account balance. It is common to has difference between the company’s bank balance and bank statement balance. This is most probably because of different in timing. For instance, certain transactions are recorded by the entity are updated in the bank's system after a certain time lag while some transactions are accounted for in the bank's financial system before the company incorporates them into its own accounting system. There are many reasons for this difference. Thereby, there is a need to reconcile the differences. In some cases, we can adjust the company’s book while other differences must be explained in another statement-bank reconciliation statement. The main reasons for the difference are: 1) the transactions are recorded in the company’s bank account but not yet recorded in the bank statement. 2) the transactions are recorded in bank statement but not yet recorded in the company’s bank account. 3) bookkeeping errors might made by the business, the bank or…show more content…
Importance of Bank Reconciliation -Preparation of bank reconciliation helps in the identification of errors in the accounting records of the company or the bank. -Cash is the most vulnerable asset of an entity. Bank reconciliations provide the necessary control mechanism to help protect the valuable resource through uncovering irregularities such as unauthorized bank withdrawals. However, in order for the control process to work effectively, it is necessary to segregate the duties of persons responsible for accounting and authorizing of bank transactions and those responsible for preparing and monitoring bank reconciliation statements. -If the bank balance appearing in the accounting records can be confirmed to be correct by comparing it with the bank statement balance, it provides added comfort that the bank transactions have been recorded correctly in the company records. -Monthly preparation of bank reconciliation assists in the regular monitoring of cash flows of a

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