It is normal for a company’s bank balance as per accounting records to differ from the balance as per bank statement due to timing differences. Certain transactions are recorded by the entity that are updated in the bank’s system after a certain time lag.

Likewise, some transactions are accounted for in the bank’s financial system before the company incorporates them into its own accounting system. Such timing differences appear as reconciling items in the Bank Reconciliation Statement.
The purpose of preparing a Bank Reconciliation Statement is to detect any discrepancies between the accounting records of the entity and the bank besides those due to normal timing differences. Such discrepancies might exist due to an error on the part of the company or the bank.

The Importance of Bank Reconciliation –
Preparation of bank reconciliation helps identify errors in the accounting records of the company or the bank.
Cash is the most vulnerable asset of an entity, so you want to make sure you are accounting for every cent.
Bank reconciliations provide the necessary control mechanism to help protect the valuable resource through uncovering irregularities such as unauthorized bank withdrawals.
If the bank balance appearing in the accounting records can be confirmed to be correct by comparing it with the bank statement balance, it provides added comfort that the bank transactions have been recorded correctly in the company records.
Regular preparation of bank reconciliation assists in the regular monitoring of cash flows of a business.
About Bookkeeping will take that terrifying pile (shoebox / folder) of receipts and reconcile them against your bank statement.

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