A is used to compare your records to those of your bank, to see if there are any differences between these two sets of records for your cash transactions. The ending balance of your version of the cash records is known as the, while the bank\’s version is called the. It is extremely common for there to be differences between the two balances, which you should track down and adjust in your own records. If you were to ignore these differences, there would eventually be substantial variances between the amount of cash that you think you have and the amount the bank says you actually have in an account. The result could be an
bank account, and fees. In some cases, the bank may even elect to shut down your bank account. It is also useful to complete a bank reconciliation to see if any customer have bounced, or if any checks you issued were altered or even stolen and cashed without your knowledge. Thus, detection is a key reason for completing a bank reconciliation. When there is an ongoing search for fraudulent transactions, it may be necessary to reconcile a bank account on a daily basis, in order to obtain early warning of a problem. When it comes time for the annual, the will always examine the company\’s ending bank reconciliation as part of their testing procedures, so this is yet another reason to complete a reconciliation. Fees. The bank has charged fees for its services, such as a monthly account fee. NSF checks. The bank may have rejected some of your deposited checks, because the person or business issuing the checks did not have sufficient funds in their account(s) to remit to your bank.
These are known as NSF ( ) checks. Recording errors. Either you or the bank may have recorded a check or a deposit incorrectly. Some organizations consider the bank reconciliation to be so important that they conduct one every day, which they accomplish by accessing the latest updates to the bank\’s records on the bank\’s secure website. This is of particular importance if a company is operating with minimal cash reserves, and needs to ensure that its recorded cash balance is correct. A daily reconciliation may also be necessary if you suspect that someone is fraudulently withdrawing cash from the bank account. Related Courses Why is bank reconciliation necessary? Bank reconciliation is an essential part of the internal controls of a business mainly in terms of recognizing recording mistakes and fraud. The bank reconciliation procedure offers an independent verification of the accurateness of the accounting records of the business and must be completed before preparing the financial statements. Why do we require to do bank reconciliation? The bank reconciliation requirements to remain completed frequently to independently confirm the accounting records of the business. The bank reconciliation explains the differences between the business \’Cash at Bank\’ account balance and the balance presented on the bank statement. Both the business and the bank keep accounting records in relation to the particular same cash at bank transactions.
These cash transactions contain deposits, cheques paid, electronic funds transfers and bank/government charges. Utmost differences between the two sets of independent accounting records can be clarified through timing differences. i. e. the time difference between writing, posting and recording the cheque and the actual cashing of the cheque with the bank. Other differences occur since sometimes on set of records is uninformed of cash transactions that the other has recorded. i. e. cash receipts that the business might have recorded but not yet banked or bank charges that the bank has paid from the bank account of the business but not yet informed the business. Also, the differences could remain clarified through recording mistakes or even deceitful activity i. e. a person records cash receipts in the business records but does not bank the cash in the business bank account. Another reason for doing bank reconciliation is to authorize the amount of money that the business essentially has available. The cash amount recorded on the bank statement might not necessarily be the amount that is available for the business to spend. This is due to the fact that the bank does not know about the cheques that have been paid but not yet presented to the bank. Before preparing the financial statements, your accountant will confirm the cash accounting records of the business through completing bank reconciliation. If the differences between the \’Cash at Bank\’ account in the business accounting records and the bank\’s accounting records as shown on the bank statement can be explained by the bank reconciliation procedure, then the accountant has increased confidence in the accurateness of the business accounting records.
The bank reconciliation is also required by auditors who check the accurateness of the financial statements of a business. These audits might be conducting for tax, funding or reporting purposes. In summary, the importance and need for bank reconciliation might be given as follows: The bank reconciliation might also show any excessive delay in the clearance of cheques. The bank reconciliation is obligatory by the auditors of the financial statements. The main benefits of working with Reconciliationaccounting are below: Consistent Data Source в Reconciliationaccounting business give you consist and precise data which can be easily used for the benefits of the decision-making desires. This in turn guarantees competence in workflow and there is no expenditure of time. Maximize your ROI: Reconciliationaccounting work give significant cost reduction and gives you high Return of asset. High Superiority Work в Main benefits of Reconciliationaccounting work is to get high quality work as per your needs with reasonable rates. Securities, Uniformity, Rapid growth, Speed, services and improve customer satisfaction, improved presentation, Backend effective work environment these are main goal of Reconciliationaccounting. We work 24/7 days for more details feel free to at any time you required.