What is bank reconciliation and how to do bank reconciliation?
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What is bank reconciliation or bank account reconciliation? How to do bank reconciliation?
Bank reconciliation procedures and methods in accounting and bookkeeping Author: Ckrishwa
Bank reconciliation means reconciling all the amounts paid and also all the amounts remitted from the organization or business into the bank have been properly debited or credited in the bank accounts. In other words matching the payment and receipts of the organizational accounts with the bank accounts is called bank reconciliation.
Bank reconciliation is essential for the purpose to agree the bank accounts or the closing balance as shown in the bank accounts of the company or business with the closing balance of departmental accounts. In principle both the bank closing balance and departmental closing balance of the company or business should match equal or tally.
But practically it may not be possible under certain circumstances of payments and receipts of the company or business. Such circumstances have to be found and proper adjustment should be made in the accounts of the business or company and those adjustments are done by preparing a bank reconciliation statement.
The process of adjusting in the books of accounts of the company is called bank reconciliation.
Every bank must supply a bank account of the organization periodically showing the debits and credits with the opening balance and closing balance available.
Normally banks should supply the bank statement of the company or business at least for every month or at the end of the month.
Normally the departmental closing balance and bank balance of the company or business will differ if the check paid from the company or organization has not been deposited by the payee in their account.
When there is a procedural delay in the bank like clearing process there will be difference between the departmental closing balance and the bank balance.
When there is a procedural lapse like signature missing in the check there arises difference between the closing balance of organizational or business accounts and the bank closing balance or bank accounts of the company or organization.
