Question

Question What is bank reconciliation? What is the objectives of the bank reconciliation statement?

Answer 1

Step 1: Definition of the bank reconciliation

Bank reconciliation is a statement that shows the difference between a bank passbook and a company’s books. Bank reconciliation statement includes deposit, withdrawal, and other activities. The bank reconciliation statement is prepared when there is a difference between the bank account balance and the company’s books balance.

Step 2: Objectives of bank reconciliation statement

To show accurate bank balance:

The first objective of the bank reconciliation statement is to correct the bank balance because there are some errors in the bank balance.

Identify the difference between the cash book and the bank statement:

The next objective of the bank reconciliation statement is to identify the reason that makes the difference between the cash book and the bank statement.

Adjust the item in the cash book:

The next objective of the bank reconciliation statement is to adjust the items of the cash book that is present in the bank statement

Answer

Bank reconciliation is a statement used to adjust the balance of the bank account and company’s books.