Completion of Bank Reconciliation

Process of Bank Reconciliation

Comparison:

Begins with comparing the company’s cash account records (cash book) to the bank statement.

Identifying Differences:

Differences between the two could be due to cheques not yet presented, bank charges or errors. Highlight and investigate these variances.

Adjustments:

Make necessary adjustments to the cash book for items listed in the bank statement but not in the cash book, like bank fees or interest earned.

Accuracy Checks:

It ensures the accuracy of the company’s financial records by verifying the cash available in the bank.

Error Detection:

Helps in detecting errors like duplications, omissions, or fraud that can affect the business’s liquidity position.

Cash Flow Management:

Provides accurate data for managing cash flow by reflecting the true cash balance.

Mismanagement of Funds:

Without bank reconciliation, a business may mismanage its funds leading to liquidity issues.

Undetected Errors:

Errors in record-keeping might go undetected, causing inaccuracies in financial statements.

Fraud Vulnerability:

Businesses become more vulnerable to fraud if transactions are not reconciled regularly.

Bank Statement:

A document issued by the bank listing all the transactions passing through the bank account over a certain period.

Cash Book:

A book where a business records all its cash transactions, including payments made and received that pass through its bank account.

Reconciliation Statement:

A document that explains the differences between the bank balance shown in an organisation’s bank statement and the corresponding amount shown in its own accounting records.