Understanding Bank Reconciliation
Bank reconciliation can be the toughest part for bookkeeping. The opinion of every bookkeeper is very different because some find it interesting, while others is boring. Whatever way we look at it, it is one of the fundamental functions of accounting which must be done. Checks which are processed very late can be bounced, if there is a sufficient stipulation for it has not been done in the business books.
Defining bank reconciliation
The process of comparing and contrasting the account balance provided by your bank with that of the company’s book of accounts as well as giving details of any discrepancy is the bank reconciliation. There may be differences, and this is due to the differences brought by the timing of registering in your book and the registering of information. Such discrepancy is a normal or typical situation and is rectified automatically within the small time. However, most frequently the discrepancy is due to a single mistake, which has to be rectified on hand and to catch this mistake, you need bank reconciliation. The corporation do the bank reconciliation every end of the month.
Reasons for maintaining bank reconciliation
When you do monthly bank reconciliation, it keeps your company’s financial records updated and apparent. As a result, back log would be eliminated. Furthermore, you can comprehend your accounting status all the time. It is important that you have a reliable and prompt communication system with the financial institution so that you keep your records apparent and precise. The bank reconciliation is the fundamental process in checking the balance on every bank statement on a specified date with the balance in your book. Charges at the bank are an additional to the deducted outstanding and amazing deposits. Outstanding or debit orders are additional to the payments.
Too many people in this world have hold a bank reconciliation at some point. There is a certain situation that the bank reconciliation cannot be balanced. And this could be due to missing information, than the skills and knowledge of the person carrying out reconciliation. In such instances, the bank statements should be reconstructed.
There are several pages behind the size and extent of the corporation concerned. If in any case, one page is missing, the reconciliation will not balance. Transactions on the missing page impacts on the result of the bank reconciliation noticeably.
If you want to get the most of your firm, you need to take care of your financial transaction behind the principle of bank reconciliation.
Bookkeeping is the basic in working your business in an efficient manner. It is very much important that you have an organized, transparent and most up to date system in place.