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Bank Reconciliations
Bank reconciliation is the process of matching and comparing figures from accounting records against those presented on a bank statement. Less any items that have no relation to the bank statement, the balance of the accounting ledger should reconcile (match) to the balance of the bank statement.
It allows individuals to compare their personal bank account records to the bank's records of the individual's account balance in order to uncover any possible discrepancies.
Bank reconciliation is part of the process of internal control. The bank reconciliation compares information coming from an outside source, the bank, with information contained in the books of the company, in this case the general ledger account, Cash in Bank. While a reconciliation of the check register can be done, it is more important to use the general ledger account because the general ledger is the source of the information contained on the financial statements. What the bank reports on its monthly statement is a record of deposits that have been made, checks written on the account that have cleared, and any miscellaneous items that the bank has recorded that affect the account, and their affect on the bank account balance. The general ledger account shows all cash received and paid from that account for the month. Neither balance is correct without adjustment. The "true" balance is somewhere in between. The purpose of the bank reconciliation is to start with each set of records and work toward that "true" balance. Obaseki and Associates will help with getting to that “true balance.” |
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