A bank reconciliation is a document explaining the reasons for the difference between a depositor's cash account in the ledger and the depositor's cash balance in its bank account. Bank reconciliation is an important accounting process in which firms compare their bank statements to the transactions recorded in their general ledger.
The preparation of a bank reconciliation statement assists organizations in eliminating potential errors in transactions or bookkeeping. A bank reconciliation is similar to a formula. (Cash account balance according to your records) plus or minus (reconciling items) = (Bank statement balance). When this formula is balanced, your bank reconciliation is finished.
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