Statements of bank reconciliation confirm that cash receipts have been placed into the bank and that payments have been handled. The reconciliation statement assists in processing any necessary adjustments or corrections by highlighting discrepancies between the bank balance and the book balance.
A bank reconciliation statement compares an entity's bank account with its financial records by providing a summary of banking and business activity. The statement lists all transactions involving a bank account for a given time period, including deposits, withdrawals, and other activity. An effective financial internal control instrument used to fight fraud is a bank reconciliation statement. Statements of bank reconciliation are useful instruments for spotting fraud. The dishonest behavior can be stopped, for instance, if a check is altered and the resulting payment is more than expected.
Rectifying discrepancies that influence tax reporting is made easier by reconciling bank statements. Without balancing, businesses risk paying taxes that are either too high or too low.
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