What is the purpose of preparing a bank reconciliation?

Question

The balance of Cash is likely to differ from the bank statement balance. What two factors are likely to be responsible for the difference?

Answer 1

The bank rec allows you to check if your entries in the cash book or account are complete and agree with the bank. Broadly speaking, the 2 factors why the balances may not be the same are:
1. Items in the bank statement which are not in your cash book e.g. bank charges or overdraft interest
2. Items in your cash book which are not in the bank statement e.g. deposits not yet credited and cheques not yet presented by the payee.

Click on the link for a full explanation of the bank recon, with illustrations, on the following topics:

Part 1 Introduction, Bank Reconciliation Process
Part 2 Sample Bank Reconciliation with Amounts

Answer 2

This Site Might Help You.

RE:
What is the purpose of preparing a bank reconciliation?
The balance of Cash is likely to differ from the bank statement balance. What two factors are likely to be responsible for the difference?

Answer 3

There isn't a pat answer for this. Look at your processes leading up to the bank deposit, and the source of your data. Typically you want to compare records from the bank, your statement or BAI file against records kept by your company. Depending on the processes, the error can occur either in your company records or in the bank records. If you are sure of your company records, the bank records may be reflecting an error in the deposit preparation, such as a missing check.

Answer 4

Reconciling your bank statement gives you a true picture of how much money you have in your account vs. what the bank is showing that you have. You have to subtract the amount of outstanding checks and debits from the amount that they give you, plus add any deposits that you have made since your statement was prepared.

Answer 5

To make sure nobody is stealing your money. The bank rec will not only "balance the check book" but it will find variances when cash has been drawn against the account without proper authorization and records.

Answer 6

I use my computer to do my checking. Never had a mistake. Before the computer had mistakes almost every month. You probably have a mistake in adding or subtracting.