A bank reconciliation statement is a financial statement that compares the bank statement of a business with the business’s own records of its bank account transactions. It is used to identify any differences or discrepancies between the two records and to reconcile them.
The purpose of a bank reconciliation statement is to ensure that a business’s records match those of the bank, and to detect any errors or fraudulent activity in either the business’s records or the bank’s records. The statement includes a list of transactions that have not yet cleared the bank, such as outstanding checks, as well as any deposits or withdrawals that have not been recorded by the bank.
The steps to prepare a bank reconciliation statement are:
Obtain the bank statement from the bank.
Compare the bank statement to the business’s records to identify any discrepancies.
List all outstanding checks and deposits in transit that have not yet been reflected in the bank statement.
Add any interest earned or fees charged by the bank that have not yet been recorded in the business’s records.
Reconcile the bank statement by adjusting the balance of the business’s records to reflect the correct balance based on the reconciling items identified in steps 3 and 4.
Prepare the bank reconciliation statement, which lists the reconciling items and reconciled balance, and includes an explanation of any differences between the bank statement and the business’s records.
Overall, a bank reconciliation statement is an important tool for businesses to ensure the accuracy and completeness of their financial records, and to detect and prevent fraudulent activity.
