What is the purpose of a bank reconciliation statement?
A bank reconciliation statement is a summary of banking and business activity that reconciles an entity’s bank account with its financial records. The statement outlines the deposits, withdrawals, and other activities affecting a bank account for a specific period. A bank reconciliation statement is a useful financial internal control tool used to prevent fraud.
How to prepare a bank reconciliation
Bank reconciliations are an essential internal control tool and are necessary in preventing and detecting fraud. They also help identify accounting and bank errors by providing explanations of the differences between the accounting record’s cash balances and the bank balance position per the bank statement.
A monthly bank reconciliation ensures that all transactions that have gone through the bank statements have been reviewed and checked, thus reducing the probabilities of errors in the data used to prepare accounts. Bank statements also ensure completeness by helping to ensure that all payments and receipts that have gone through the bank account have also been recorded in the accounting records. Any differences are identified and explained.
Want to know how to prepare a bank reconciliation statement? Using our free reconciliation template is a great first step.
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