bank reconciliation

What is bank reconciliation?

A process of matching the balances on an entity's cash book with the balance on its bank statement. It helps to identify any differences between the two records.

What is the primary purpose of bank reconciliation?

To ensure that the cash book balance reflects the true cash position, identify errors made by the bank or the business, and detect any unauthorized transactions.

What does an 'updated cash book' mean in the context of bank reconciliation?

It refers to the cash book adjusted to include items that affect the company's cash balance but were not previously recorded, such as direct deposits or bank charges.

What types of items are typically added to the cash book during the reconciliation process?

Items such as direct deposits by customers, interest received, and dividends collected by the bank on the company's behalf.