Bank reconciliation

Welcome to this lecture on bank reconciliation. Every business, regardless of size or industry, relies heavily on having an accurate picture of its cash position. The process of reconciling the bank account is not just a mechanical task. It's a critical internal control that helps to uncover errors, omissions, and even fraud. Bank reconciliation is the process of matching the balance in your accounting records for a cash account to the corresponding information on a bank statement. Differences might well arise, but understanding and resolving these is essential for maintaining trustworthy financial statements. Simply trusting your accounting records or bank statement alone is not enough. Erors can creep in, such as omitted transactions, entries in the wrong account or amounts recorded incorrectly. Payments may be recorded twice or receipts deposited, but not recorded in the books. Bank processing delays, outstanding checks, or unrecorded bank charges also cause discrepancies. Regular reconciliation solves these issues and ensures your cash balance is accurate. Wire card's failure to get independent bank confirmations allowed major fraud to go undetected. The bank reconciliation process begins by comparing your cash book balance to the bank statements closing balance. Differences often result from timing issues, such as outstanding checks or deposits in transit. Items on the bank statement, not in your cash book, like direct debits, standing orders,