What is the purpose of bank reconciliation?
Quick Answer
According to Accounting Tools, the purpose of a bank reconciliation is to compare the bank's records of transactions for an account with the account holder's records. Completing a regular reconciliation of all bank accounts helps to bring attention to variances, errors and fraudulent activity on the account. Common variances include bank fees, insufficient funds check deposits and incorrectly recorded transactions.
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Accounting Tools notes that companies that participate in end-of-year audits may find it beneficial to complete regular bank reconciliations. Producing regular reconciliations assists in the auditing process and helps to eliminate inconsistencies on end-of-the-year account reconciliations.
Accounting-Simplified.com reports that the completion of bank reconciliations is a tool used by companies to manage cash. When a company employee prepares a bank reconciliation report, the report shows any variances between the bank's records and the company records. It also indicates what amount is pending and if there were any recording errors. A bank reconciliation report notes which discrepancies were satisfactorily resolved. Once the reconciliation report is complete, the company's cash book or financial records is amended to reflect the verified discrepancies and the corrected transaction records. This includes adding items, such as accrued interest and bank fee deductions, to the company's transaction records for the period.
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Where can you find free bank reconciliation forms online?
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