Bank reconciliation statement is really an important reconciling report to check the disagreement between the cash book balance and bank balance. It identifies the difference and the causing reasons of the same.
In simple terms it is the detail explanation where you can come to know about the reasons for the differences between the bank balance and the balance demonstrating the organization’s own cash book. Making Bank reconciliation is vital if you are at all a bank account holder.
Often it has been seen there are many reasons where a disagreement occurs between the balances of cash book and pass book. A few expecting reasons being the check issued by the business may not be presented for payment, any direct deposit from the customer without informing the business, deduction or bank charges deducted in any, a sort of legal penalty including errors of addition or overcasting or under casting of accounts on the part of bank or the account holder.
To know the correct cash balances of accounts it is the right technique to ensure the accuracy of your bank books.
Here we will be discussing the need and significance of bank reconciliation statement to an organization.
- It facilitates a check on the accuracy and precision for both your bank and cash book.
- It is helpful to ensure the accuracy of the both the books.
- It identifies the errors and the reasons behind it.
- It helps the cash book to detect the entries omitted to record
- Bank reconciliation statement often discover some undue delay from banks side in collecting and clearing the checks
- Last but not the least, it is the best approach to find out any embezzlement cash, fraudulent activities or misappropriation of funds.
So now it is very clear that bank reconciliation is all about to compare the business transaction of your cash book and bank book in order to make-out the differences between these two sets if any.
The final balance indicated in the cash records of the organization’s book as called the book balance and the same in the bank’s version is known as bank balance.
Being a business owner you will definitely find some differences between these two balances. Now the real game starts. You should track down the reasons of disagreement and detect the causes there of. Thus knowing the causes you can able to settle the account to an extent. This practice is very important to follow regularly to keep a control and transparency in your own records. Ignoring or delaying the differences may land up you with widening up the gap.
Before that just find out the responsible reasons like bounced checks, an overdrawn bank account or overdraft fees to settle the difference of both the accounts.
Why Bank reconciliation statement necessary for my business:
- It is important when you are struggling to identify any customer checks have bounced
- Sometimes you encounter with the checks stolen, altered or cashed without your knowledge.
- Bank reconciliation statement can be considered as the best fraud detection technique.
- Do embrace the approach to avoid the future alarming issues.
Not only for day to day routine purpose but the technique is useful while performing the annual audit as well. To know the accuracy of the cash book the auditors verify the validity of the organization’s cash book while they need complete bank reconciliation.
All organizations irrespective of the nature of their business need to do the reconciliation services. Often it is not possible for some business owners to do it on own. We the Outsourced Bookkeeping suggests you to take a professional assistance for doing the same.
We have qualified accountants and bookkeeping professionals having good reconciliation skill. They can spot out the area in which your records could vary from the bank records by comparing the cash records and pass book. Thus you can have a better control over the cash aspect. You can come to know about your correct cash availability before taking any business decision. This will also help you to manage working capital requirement for your business.
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