This article will inform you What is the aim of Bank Reconciliation? This is process that ensures that your financial information is valid and accurate. It is a method to find out of any unauthorized changes such as transactions have taken place during processing.
What is bank reconciliation?
Before we understand What is the aim of Bank Reconciliation? It is important to know what it is in the first place. It is the process where the financial records of a company are checked to ensure there have been no unauthorised transactions taken place.
This process is generally advised as it helps to identify errors, omissions and transactions that was not authorised in the first place. This is a significant viable tool for to manage cash flow.
The Three Types of Bank Reconciliation
When you think of bank reconciliation it can be divided into three main types. They are:
- Periodic reconciliation
This consists of checking the transactions that have taken places between corresponding accounts throughout. This is generally done on a monthly basis. If any inconsistencies during processing have taken place, this process is able to identify and detect it. What they do is, they correct it before it becomes a problem. In that way, the financial records remain up to date and accurate.
- Continuous reconciliation
This is a process that involves matching transactions either in real time or daily basis. This is a strategy that helps business to maintain the accuracy and legitimacy of their financial records. This process becomes useful for firms that deal with a high number of transactions and it helps to speedily discover and identify differences.
- Inter-company reconciliation
This is a process that consists of matching intercompany transactions between different companies that are under the same organisation. It is a fundamental step to firms that have multiple subsidiaries or divisions.
What are the Benefits of bank reconciliation?
- Bank reconciliation is fundamental to help decrease the risk of financial misstatements.
- Â It will aid in guarding against fraudulent charges.
- It helps to keep records updated and accurate.
- It provides a credible picture of the cash flow in the company including funds that remain in transit.
- They are used by auditors to perform a company’s year-end auditing.
- It helps you handle cash flow and better manage it since all transactions are recorded accurately.
What is the aim of Bank Reconciliation?
The process of bank reconciliation involves checking the financial transactions of a company to ensure accuracy and authenticity. It is a crucial process which is recommended to companies that want accuracy in their records and internal finance.
- When there are errors or discrepancies in the company bank or account, it helps identify that.
- When fraudulent charges take place, it helps to protect against such.
- It helps to ensure that all transactions are accounted for and the accounting of the company is clean, accurate and complete.
- When a company has a lot of cash flow coming in, bank reconciliation can reveal how much of it is coming in and out of a business at any time.
- When you engage in such reconciliation it helps to understand if financial records align with actual bank transactions.
- It is highly crucial for companies that involve in several financial transactions per day.
What is Bank reconciliation accounting?
A bank reconciliation statement is when a document is compared with the balance sheet of the company to the corresponding amount on its bank statement. When two accounts are reconciled, it helps understand and recognise whether accounting changes are needed.
| What is the Purpose? | The purpose is to Verify transactions, identify errors, and ensure accuracy of financial data. |
| How does it work? | It works by comparing transactions recorded in a company’s books to those listed on the bank statement. |
| What are the benefits you can expect? | It helps you identify missing or duplicate transactions, bank errors, or fraudulent activity that is happening or has happened. |
| When it’s done? | Usually it is done on a monthly basis |
How to do bank reconciliation quickbooks online?
To reconcile your bank account in QuickBooks Online, you can start by doing the following:
- First you must visit the Reconcile page
- And then choose the account you want to reconcile
- Afterwards enter your bank statement information
- Match and clear transactions
- Continue to clear  transactions until the Difference field is zero
- Save or Finish
Here are some further tips for reconciling:
- The application of filters, because they can help you find transactions more easily
- Saving your work and add missing transactions before continuing
- Comparing each transaction in your statement with what’s in QuickBooks
- Editing transactions in the event you have found a match but something isn’t quite right, select the transaction in QuickBooks to expand the view, then select Edit.
Conclusion
If you were wondering What is the aim of Bank Reconciliation? You have your answers in this article. It is a process recommended to any company that involve sin daily number of transactions per day. It helps ensure your accounts are kept clean and free of any unauthorised transactions.
Key Points
- Bank reconciliation ensures financial accuracy by comparing transactions in company records with those in bank statements, detecting discrepancies or errors.
- It helps identify unauthorized transactions, preventing fraudulent charges and maintaining clean financial records.
- The process improves cash flow management by providing an accurate picture of incoming and outgoing funds.
- Periodic, continuous, and inter-company reconciliations allow businesses to maintain accurate records based on transaction frequency and company structure.
- QuickBooks Online simplifies bank reconciliation through a step-by-step process that involves matching and clearing transactions, ensuring financial data is up-to-date.
FAQs
What are the two objectives of bank reconciliation statement?
The Bank Reconciliation Statement (BRS) shall be prepared in order to: (a) to check for any errors and correct them. This also includes the banks agency records. Secondly, it helps to identify fraudulent activities or transactions. Third, it helps the bank/agency to take up charges or credits recognized by the bank/agency but not yet known to the agency/bank.
What is the objective of bank reconciliation control?
One of the objectives of bank reconciliation control is it ensures that legitimacy of the records and accounts by comparing bank records to accounting records. If there have been any unauthorised activities, it can identify them.
What are the goals of reconciliation?
One out of the many goals of reconciliation is ensuring legitimacy and marinating clean records.
What is bank reconciliation function?
A bank reconciliation statement is a document where the cash balance and the corresponding amount of the bank statement is compared. When this takes place between two accounts, it helps identify whether accounting changes are needed.