Bank Reconciliation

Bank Reconciliation is the process of matching a company’s internal cash book records with the bank statement to identify any discrepancies. It ensures that all transactions are accurately recorded and that any errors or missing entries are corrected. This helps in maintaining accurate financial records and detecting fraud or errors. The process also helps to ensure the accuracy of the company’s cash position for financial reporting.

Key Notes:

• Compare cash book and bank statement
• Adjust for outstanding cheques, deposits in transit, and bank charges.
• Ensure both records match after adjustments.

Examples:

• Outstanding cheque: A cheque for ₹1,000 is issued but not yet cleared by the bank.
• Deposit in transit: ₹2,000 is deposited in the bank but not yet reflected in the bank.
• Bank charge: A bank fee of ₹200 is deducted from the account but not recorded..
• Interest income: Bank adds ₹500 interest, but the company hasn’t updated its cash book.