Purpose of Bank Reconciliation
Bank reconciliation is a way by which figures from the bookkeeping records are matched against those which are in bank statements. The purpose is to detect the differences or inconsistency in bank statements and your books of accounts. The reasons of occurring these discrepancies may be many such as different time of recording transactions in bank account and your company’s accounts. This is a minor difference that is settled down with the passage of time but some differences are a result of some big error. Such differences require to be corrected physically. These reasons and differences make it necessary to prepare a bank reconciliation statement.
Why is it Important?
Following are some important facts that will enable you to understand the importance of bank reconciliation statement.
Bank reconciliation statements are prepared to detect some kind of fraud. When the account holders receive a list of charges to the account by bank, account holders then see the charges that seem to be fake and deceitful.
In order to ensure the accuracy of transaction, account holder matches the amounts in books with those of bank statement as the statement has a list of amount of each check.
Through reconciliation, bank errors can also be detected. It is quite possible that bank might have overcharged or undercharged the account holder. In that case, reconciliation proves to be very helpful to explain an error to the bank.
Reconciliation can also be proved a tool which may be used by the account holder to detect some error in his own book of accounts.
Reconciliation gives information to the account holder regarding the amount of money in his bank account which can be spent securely.
Bank reconciliation is a way to make sure that the transactions are recorded in correct period of time.
Other benefits of bank reconciliation may include:
- It helps to keep the financial statements of company clear and error free.
- It reveals misdeeds.
- If bank reconciliation is not prepared then you are at risk which means that your account can be stolen.
- It provides a way to examine your transactions.
Keeping in mind this importance of bank reconciliation, it should have become clear to you that preparing a bank reconciliation statement is of great importance. Are you worried about how to make it? Then there is no need to worry. You can search a number of bank reconciliation templates on internet which are capable of editing and modification.
