Bank Reconciliation statements 2

Bank Reconciliation statements

Provide a reconciliation between the balance in the cash book and the balance on the bank statement

The main reasons for the difference in the balances between the cash book and the bank statement are as follows:

Transactions only in the cash book
Transactions only on the bank statement
Transactions showing a different amount due to an error by the business in the cash book
Transactions showing a different amount due to an error on the bank statements.

Benefits of bank reconciliation statements:

Improves accuracy of the accounting system
Assists in deterring fraud
Provides the correct bank balance figure for inclusion in the trial balance and financial statements.
Assist in tracking uncleared lodgements and unpresented cheques until they appear on the bank statement.
Helps to identify any dishonoured and out of date cheques.

Drawbacks of bank reconciliation statements:

Uncleared cheques can create a mis-match.
Changes in dates recorded by banks.
Too many transactions.