A bank reconciliation is a periodic process that ensures the accuracy of your financial records.
It’s important to prepare reconciliations periodically .
Because there are many reasons why errors could creep in and go undetected for long periods of time, including.
Unintentional mistakes made by employees, fraud or theft by an employee, accounting errors from third-party service providers (e.g., bookkeepers) .
A reconciliation is a process that goes something like this.
You review your bank statements, compare them to the records in your financial reporting system and make corrections as needed.
The comparison leads to an adjustment of cash on hand (or some other account). When these adjustments are made.
They need to be posted back into the general ledger for each asset or liability affected by the correction.
This post-adjustment balance sheet should then match up with what’s shown on your latest statement from the bank.
It’s important to note that when preparing periodic reconciliations, it’s imperative not only to check balances but also transaction .
Details and timing because there may have been errors recorded internally within accounting software which can’t be detected until a detailed analysis .