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Bank Reconciliation - What Is It?

Eric Greenfield

An experienced bookkeeper, Eric Greenfield serves as the lead consultant and principal at Bookkeeping Manhattan in New York. Through his company, Eric Greenfield provides a wide range of services to small and mid-size businesses, including bank reconciliation.

Bank reconciliation is a type of cash control procedure used by businesses. It involves comparing the balances in a company’s accounting records to the cash in the entity’s bank statement. In doing so, companies are given the chance to spot irregularities and errors between their cash account and accounting records. This helps them catch accounting mistakes early on at their bank or detect fraudulent activity within their business.
Companies should perform bank reconciliations at regular intervals for every bank account they maintain. Most businesses complete this procedure once a month when the bank sends a bank statement. Even at this frequency, the process of bank reconciliation can be time consuming, especially for companies that write large numbers of checks every month or make many deposits. Some businesses can complete bank reconciliations fewer times during the year, but accounts that don’t require regular reconciliation may not be worth keeping open.
When companies perform bank reconciliations, they should task an independent person with it to reduce the risk of fraud. Beyond that, they should remember that a company’s ending cash balance rarely matches the ending cash balance listed by the bank. This is because some deposits take time to appear in bank accounts and they are recorded immediately in a company’s accounting records.

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