What is Bank reconciliation
BANK RECONCILIATION STATEMENT
Bank Reconciliation Statement Definition
A bank reconciliation statement could be defined as the summary of the banking and business accounts that reconciles a company's bank account with its financial record. The statement contains a record of all the deposits, withdrawals and other financial activities with a bank over a certain period of time. It is a useful tool to control fraudulent activities.
Preparing a bank reconciliation statement
To complete a bank reconciliation statement, the accountant needs the following data
Steps to Prepare a bank reconciliation statement
Benefits of a Bank Reconciliation Statement
Bank reconciliation statements, if done properly and accurately is nothing but good for the financial record of a company. However, when there are long gaps between reconciliation sessions, problems can arise (like urgently required information may not be available at the moment, or problems during tax filing). Inaccurate bank reconciliation statements can cause problems with the financial record. Therefore, it is advisable to use software for recording such statements.
What is a bank reconciliation statement?
A bank reconciliation statement is a summary of all the transactions (deposits, withdrawals, extra charges and interest) on a company's bank account and its equation with its financial records. The two must tally.
Why is a bank reconciliation statement required?
A bank reconciliation statement is an excellent way to detect fraudulent activities (like a wrong cheque amount). It can be useful when the company's tax filings are being done.
How often should you do a bank reconciliation statement?
Ideally a bank reconciliation statement must be done monthly or as frequently as statements are generated.
Disclaimer: This content is authored by an external agency. The views expressed here are that of the respective authors/ entities and do not represent the views of Economic Times (ET). ET does not guarantee, vouch for or endorse any of its contents nor is responsible for them in any manner whatsoever. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified. ET hereby disclaims any and all warranties, express or implied, relating to the report and any content therein.
Bank Reconciliation Statement Definition
A bank reconciliation statement could be defined as the summary of the banking and business accounts that reconciles a company's bank account with its financial record. The statement contains a record of all the deposits, withdrawals and other financial activities with a bank over a certain period of time. It is a useful tool to control fraudulent activities.
Preparing a bank reconciliation statement
To complete a bank reconciliation statement, the accountant needs the following data
- Current and previous month's bank statement
- The closing balance of the bank account
- Any outstanding payments or withdrawals (cheques that haven't been processed yet)
- Any fees charged by the bank on the account
- Interest earned on the bank balance
Steps to Prepare a bank reconciliation statement
- Compare the financial record on the company book to the bank statement.
- For any errors ( unaccounted for deposits and represented withdrawals) changes are made to the corresponding bank statements
- Make necessary changes in the log book and bank statements for fees, charges deducted and interest credited.
- The final step is to compare the two records - the company's own financial statement and the account statement. If they are the same, your bank reconciliation is done. If not repeat the process.
Benefits of a Bank Reconciliation Statement
- A bank reconciliation statement ensures that all payments made by the company are processed and all deposits are correctly made on time.
- Bank reconciliation statements are great for detecting frauds in financial transactions of large companies (which are difficult to keep track of, otherwise).
- Bank reconciliation statements also help to analyze errors that can affect the financial transactions of a company or business.
- Such statements help to assess the financial health of a company and take adequate financial decisions for the betterment of business
- Bank reconciliation statements are also a key to accurate tax reporting. Without a proper financial statement, a company may end up paying too much or too less taxes.
Bank reconciliation statements, if done properly and accurately is nothing but good for the financial record of a company. However, when there are long gaps between reconciliation sessions, problems can arise (like urgently required information may not be available at the moment, or problems during tax filing). Inaccurate bank reconciliation statements can cause problems with the financial record. Therefore, it is advisable to use software for recording such statements.
What is a bank reconciliation statement?
A bank reconciliation statement is a summary of all the transactions (deposits, withdrawals, extra charges and interest) on a company's bank account and its equation with its financial records. The two must tally.
Why is a bank reconciliation statement required?
A bank reconciliation statement is an excellent way to detect fraudulent activities (like a wrong cheque amount). It can be useful when the company's tax filings are being done.
How often should you do a bank reconciliation statement?
Ideally a bank reconciliation statement must be done monthly or as frequently as statements are generated.
Disclaimer: This content is authored by an external agency. The views expressed here are that of the respective authors/ entities and do not represent the views of Economic Times (ET). ET does not guarantee, vouch for or endorse any of its contents nor is responsible for them in any manner whatsoever. Please take all steps necessary to ascertain that any information and content provided is correct, updated and verified. ET hereby disclaims any and all warranties, express or implied, relating to the report and any content therein.
