Bank Reconciliation — Core Concepts
Six topics covering the full reconciliation process from identification to journal entries. Click any card to expand.
A bank reconciliation is a process that explains the difference between the cash balance shown on the bank statement and the cash balance in the company's accounting records (the book balance). These two balances rarely agree due to timing differences and items the company or bank has recorded that the other hasn't yet.
Why Is It Needed?
- Verifies the accuracy of both the bank's records and the company's records.
- Detects errors and fraud early — unauthorized transactions show up here first.
- Required for strong internal controls over cash (the most liquid asset).
- Ensures the cash balance on financial statements reflects the true available balance.
The Goal
The reconciliation produces an adjusted cash balance — the true cash balance that should appear on the balance sheet. The two columns (bank side and book side) must both reach this same adjusted balance.
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