Understanding Bank Reconciliation
According to the bookkeepers, the bank reconciliation part is the toughest part among the entire process. Some bookkeepers find bank reconciliation as a very interesting job., but there are those who find it very boring. Irrespective of the opinions, it is one of the most fundamental operations of accounting which should be done. As you can see, even the checks that has been processed late.
Knowing the concept of 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. You should consider that the discrepancy in the balance may be due to the timing brought differently in registering the information in the books and in your company’s books. Such discrepancy is a normal or typical situation and is rectified automatically within the small time. However, most frequently the discrepancy is due to an mistake, which has to be manually rectified and to catch this mistake, you need bank reconciliation. The corporation do the bank reconciliation every end of the month.
Why bank reconciliation is a need
When you do monthly bank reconciliation, it keeps your company’s financial records updated and apparent. You never build up an erroneous backlog. Moreover, you will understand 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 basic process in checking the account on every bank statement. Bank charges are an additional to the cashbook payments, deducted outstanding checks, and excellent deposits are added. Debit or outstanding orders have always been an additional to the payments.
Too many people in this world have hold a bank reconciliation at some point. However, since life is not perfect, there is a situation that bank reconciliation will not be balanced. And this could be due to some missing information, than the skills and knowledge of the person carrying out reconciliation. In such instances, the bank statements should be reconstructed.
Depending on the size and extent of the entity concerned, a bank statement for a specific period could consist of several pages. The transaction will not balance if there is one page missing. 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 fundamental in operating your business in an informed way. It is very important that you have a transparent, organized and updated bookkeeping system in place. One of the ways to keep track of your books is the bank reconciliation.