Explanation:

Bank RECONCILIATION statement is a report or statement prepared by the business to match the bank transactions recorded in the books of accounts with the bank statement. The bank reconciliation statement helps to check the correctness of the entries recorded in the books of accounts and thereby, ensures the accuracy of bank balances.

Why bank reconciliation STATEMENTS are prepared?

With the definition of a bank reconciliation statement, you might be wondering why bank transactions recorded in the books of accounts do not match with the bank statement? There are plenty of reasons and some the common ones are listed below:

Cheques Issued but not cleared in the bank

Difference in cheque DEPOSITED and cheque credited date

Date of cheque issued towards payment and date on which it is debited is different

Cheque issued or received is not presented to the bank for clearing

Bank INTERESTS, CHARGES etc. are not accounted for. Reason being it is not known till you reconcile.

Banks can also do mistake in debiting or crediting the transactions

Just like banks, you too can make mistake in accounting the bank transactions in books of accounts and so on….