Bank Balance Reconciliation

Bank balance reconciliation happens when you compare your records to the bank statements.  You have to do bank balance reconciliation statements at least every month in order to make sure what is happening with your account. Let us know some of the importance of bank reconciliations and how it works.

What is Bank Reconciliation?

Bank Reconciliation is a method of comparing your account transactions and balances with the bank records and balances.  You have to check and compare each and every accounting statement with the bank. Most of the times outstanding cheques will not be entered in your bank statement since the bank will not know about it. Similarly, there might be some electronic transfer at the bank which you might not know about it.  Brining all of these into open is known as bank reconciliation or bank balance reconciliation. If you are familiar with balancing your cheque book then you will be familiar with the bank balance reconciliation.

Why Bank Reconciliation is very important?

It is very essential to check the method and process of bank balance reconciliation. If you don’t do it, then you are taking some risks.  With the bank balance reconciliation, you will not be aware or know how much cash is available in your account. You may bounce cheques and might incur overdraft charges. With the electronic cheque clearing, you do not have a lot time to get funds or money in your account while you write cheques. Without the bank balance reconciliation, you would also expose yourself to problems. Many of the people might be taking or stealing cash from your account. If you don’t check your transactions, you will never know about it. That is why it is very important for you to check and compare each and every transaction with the bank account. If you do not inform the bank quickly, then you might be out of luck. Sometimes there might be some mistakes from the bank therefore it is necessary to check your transactions and your bank balance regularly.

Questionnaire:

• What is bank balance reconciliation?
• What are the importance of bank reconciliation?