Understanding Bank Reconciliation
Bank reconciliation can be the toughest part for bookkeeping. For some bookkeepers, bank reconciliation is fun, but for the others it is nothing but a boring job. Irrespective of how the professionals see it, it has always been the most essential operations. Checks which are processed very late can be bounced, if there is a sufficient stipulation for it has not been done in the business books.
What is bank reconciliation?
The procedure of comparing and contrasting the account balance provided by the bank with that of the firm’s book of accounts as well as explaining any discrepancy is the bank reconciliation. There may be differences, and this is due to the differences brought by the timing of registering in your book and the registering of information. Such discrepancy is a typical situation and is rectified automatically within the small time. However, most frequently the discrepancy is due to an mistake, which has to be manually rectified and to catch this mistake, you need bank reconciliation. Every end of the month, all corporations do the bank reconciliation.
Why bank reconciliation is a need
First of all, maintaining a bank reconciliation every month will keep your company’s financial records updated and clear. As a result, back log would be eliminated. Furthermore, you can comprehend your accounting status all the time. It is incredibly important that you have solid and reliable communication and collaboration power with the financial system. The bank reconciliation is the fundamental process in checking the balance on every bank statement on a specified date with the balance in your book. Bank charges are an additional to the cashbook payments, deducted outstanding checks, and excellent deposits are added. Debit or outstanding orders are additional to the payments.
A lot of people have a hold on bank reconciliation to some extent. There is a certain situation that the bank reconciliation cannot be balanced. And this could be due to the missing information, and the knowledge and skills of the person executing reconciliation. In such circumstances, the bank statements should always be reconstructed.
There are several pages behind the size and extent of the corporation concerned. One missing page will not balance. Transactions on the missing page impacts on the result of the bank reconciliation noticeably.
If you want to get the most of your firm, you need to take care of your financial transaction behind the principle of bank reconciliation.
Bookkeeping is basic in working your business in an efficient manner. It is very important that you have a transparent, organized and updated bookkeeping system in place.