WHAT IS BANK RECONCILIATION?:
A bank statement reconciliation is a summary of business and banking activity that summarizes an entity’s financial records and deposits. It can be used to prevent fraud.
KEY POINTS:
- It is a statistical summary of an entity’s business and banking activity. It reconciles the records of an organization with its financial statements.
- It shows that various transactions, such as payments and cash collections, have been processed.
- It must also reflect all fees that the bank charges on an account. After all, adjustments have been made, the balance on the account should equal the ending amount.
HOW TO UNDERSTAND THE BANK STATEMENT:
Cash collections and payments are deposited into the bank, and the reconciliation statement shows the difference between the book and bank balance. It helps in identifying potential corrections or adjustments.
WHAT ARE THE BENEFITS OF A BANK RECONCILIATION STATEMENT:
- It can help prevent fraud. For instance, if a check has been altered, this can be reported to the bank so that measures can be taken to stop fraudulent activity.
- It can also help identify errors affecting an organization’s financial reporting. These statements, which are used to calculate a company’s profitability, are very important to investors. Having the correct information allows them to make informed decisions.
- It can also help identify errors that could affect the tax reporting of an organization. Doing so can prevent companies from paying too much or too little.
- It can help organizations identify errors related to their financial reporting and tax filings.
BOTTOM LINE:
The use of a bank statement reconciliation is a useful tool that can help prevent fraud, identify errors, and minimize the damage they can cause. It can also help manage cash flows.
Let TandA help you to get your Bank reconciliation in order today.