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A Brief Description Of Preparing a Bank Reconciliation

Referencing Styles : APA | Pages : 1

Bank reconciliation statement is a summary of the business activity and banking which states the bank account entity containing all the financial records of the business. The bank reconciliation statement outlines the deposits, withdrawals and other activity which creates impact on the banking activity for a certain period of time. The bank reconciliation statement is needed to control the internal system of the company by utilizing the tool and techniques in order to tackle to frauds and errors in the business.

Bank reconciliation statements of the company ensure payments which are treated along with the collection of cash which is deposited in the bank. The reconciliation statement of the company helps to identify the key differences between the book and bank balance. The adjustments in that case are made based on a particular sequence where the corrections in that case are also made accordingly.  The reconciliation of the company is prepared on a particular month.   The cash related transactions of the company whether it is receipts or payments involves the checking accounts.  The checking accounts which is prepared by the bank including the deposits and payments are further processed within the system. The bank in that case mails the particular statement of the company in order to further verify the accounts accordingly. The list of activities in the recent months are further recorded as the balance of the bank accounts.

When the company receives its bank statement, it must verify the amounts recorded in the bank statement which are the compatible with the amount in the cash accounts recorded in general; ledgers. When the account is confirmed and verified referred to as the reconciliation of the bank statement. The cash account which is recorded by the company is consistent with the amount of cash as per the banking records.

However, bank reconciliation is the process of matching the balances of the accounting records prepared by the company as per the information’s of the bank statement. The main objective in this case is to identify the difference between the accuracy in the accounting records of the firm. The information’s related to the banking records and statement includes the transactions creating impact on the bank account of the company.

The reconciliation must take place on an interval basis in order to ensure that the cash records of the company are correct. The cash balance are further expected to be much lower resulting to the overdraft fees or in case of the bounced checks. The reconciliation of the bank will also detect the misrepresentation or the fraud which takes place in order to get efficient control over the cash payments and receipts. There lies no risk of periodic bank reconciliation apart from the existence of the bank when the activity level of the bank is limited. In this situation it will be better for the company to cancel the account and open another account. This process will be far easier to invest in the residual funds by further monitoring the investment status of the business.         

The reconciliation statement of the bank shortly end after each month and the bank send the statement containing opening cash balance as the transaction ends after each and every month. It is significant for the company to prepare the reconciliation on an interval basis which is accessible from the website of the bank. After completing the everyday reconciliation it is required to identify and correct the problems accordingly. The cash balance of the company and the cash balance of the bank will never be identical despite of the multiple receipts and payments which further includes the bank service fee, penalty on the overdrafts and sufficient funds deposited by the company which is yet not recorded in the system.  

The significant flow in the reconciliation of the bank starts with the ending of the cash balance and further deposits in that case are taken into transit which is further adjusted accordingly. After adjusting all the payments, fees and income the adjusted bank balance must be equal to the ending adjusted cash balance in that case.

The procedure of bank reconciliation are recorded accordingly:

  • The bank reconciliation of the company is prepared by the process of utilizing the accounting software package actually makes the reconciliation process easier:
  • The software of the bank reconciliation is adjusted as per the software modules where the list of the deposits and checks appears which are not cleared by the company.  
  • The bank reconciliation of the company must be checked which are further listed in the bank statements due to the clearance of the bank takes place.
  • It is needed to enter the expenses of all bank charges appearing on the bank statement and the records which are not recorded accordingly. The recorded are maintained in the system on an interval basis where most of the companies tries to keep or rather update the system accordingly.
  • The ending balance of the bank statement must be recorded as per the balance of the bank and book balances. When the balances of the reconciliation does not matches then it is needed to add the banking reconciliation items.
  • Then it is needed to check the banking records and the different accounts of the company recorded accordingly.
  • The banking records differs from the amount recorded as per the company’s records.
  • All the deposit records of the bank are not recorded in the statement of the company which are also kept in record of the company.

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