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.
Learn more about Bank AccountsRelated Questions
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Q:
Where can you find free bank reconciliation forms online?
A: The BizFilings website provides a free, downloadable monthly bank reconciliation worksheet. The worksheet is designed to provide greater accuracy when reco... Full Answer >Filed Under: -
Q:
What is a bank reconciliation statement?
A: A bank reconciliation statement is a statement that gives a comparison between the balance in the bank as per the accounting records of the company and the... Full Answer >Filed Under: -
Q:
Where is there a template for a bank reconciliation?
A: SME Toolkit and Business Owner's Toolkit offer templates for bank statement reconciliation, their websites show. Both websites offer Microsoft Excel spread... Full Answer >Filed Under: -
Q:
Where can someone verify a bank account online?
A: Websites that handle electronic banking transactions, such as Coinbase and Venmo, typically require verification of bank accounts and provide the resources... Full Answer >Filed Under:
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