The term bank reconciliation might be known to you if you are involved in accounting or knowledgeable about the matter. BRS is prepared on a periodical basis to check bank related transactions are recorded properly in cash book’s bank column and by the bank in their books or not. While doing the bank account reconciliation process, one must scan the bank statement and check if the account of your company or personal accounts has the same data. UPI transactions tend to be forgotten and are not displayed in most people’s accounts which creates a difference with the bank statement. Frequent errors like this should be noted and solved beforehand.
It is easier to figure out about mismatches and glitches in accounting if bank account reconciliation is done. This makes sure that everything is transparent and clear contributing to an accurate financial statement.
The top 5 needs and importance of the bank reconciliation statement are summarized below in points.
Ensure accuracy of cash and entries:
To be certain about the amount of cash reported on the company’s balance sheet is the correct. The additions and deductions on the bank statement are reconciled with the items that are entered in the company’s general ledger cash account. It’s easy to forget to enter an expense or a payment when you’re in a rush, so cross-checking against the account statement can be a good safety net for your own books.
Detect errors or omissions:
Any omission or error in the company’s general ledger cash account also means that other general ledger account will have a corresponding omission or error. These mistakes include errors such as addition and subtraction, missed payments and double payments. The bank reconciliation could prevent this type of company from issuing an incorrect balance sheet and an incorrect income statement.
Improve internal control over the company’s cash:
Internal control over the company’s cash can be improved If bank reconciliation is done by someone other than the employees handling or recording receipts and payments. You can also reduce the dishonest acts (involves company’s cash) of employees.
Payments due for one month might not appear on your bank statement until the next month, if you receive the payments near the end of the month. BRS helps you to track the individual invoice till the payment is received against it. Thus, at any point, you can easily track the bills pending instead of just knowing the overall outstanding of a customer.
Catch fraud and cash manipulators:
It is suggested to have an independent party perform your reconciliations to prevent fraudulent in Future. Bank reconciliations statement also helps you in catching employees from stealing your money.
If the bank reconciliation process has been done successfully, the financial statement will automatically be more accurate.