What is the true purpose of a bank reconciliation ?

The true purpose of a bank reconciliation is to find out the differences between company's books of accounts and bank statement. Obviously there would be differences because of time span and there would be a solid reason for such discrepancy. We can list down some major elements which are the main cause of disagreement between the two parties:1. Bank charges ,charged by bank but customer isn't aware of those because he didn't get any debit advice for that charge (he will receive it later on)2. Direct deposits into company's bank account by its debtors ,3.Company released cheques that are yet to be presented by the beneficiaries but company already credited those.

the true purpose of bank reconciliation is to find the difference between the cash balance on the books and on the bank statement

b. There can be differences but there must be a valid reason for the differences.

b. There can be differences but there must be a valid reason for the differences.

These differences may be for cheques not yet handed over to suppliers, cheques by postponed date issued to suppliers, mony transfered to our account, or charges on the company from the bank. 

Bank Reconsilation is the process of ensuring that the balances of two A/c are in agreement. The purpose of Bank Reconsilation is to make sure that the amount going from our a/c is equal to the amont we spent. 

Reconciling your bank account transactions with your monthly bank statement is known as a bank reconciliation. The process requires comparing your bank statement with your record of withdrawals, check payments, deposits and financial transfers. Reconciliations help ensure that your balance total is correct, determine what outstanding payments have not cleared and establish any discrepancies. Bank reconciliations can be processed for small businesses and personal checking accounts and savings accounts, or for corporate accounting requirements.

Determining Account Balance

Reconciling your bank account to your checks, withdrawals and deposit records helps establish your true account balance. Your balance statement may not reflect payments that you have made but that have not been deducted from your posted balance. Knowing your true balance is essential for avoiding overdrawing your account and ensuring you have sufficient funds to cover needed withdrawals for bill payments or spending money.

Uncovering Problems

Routine review of your bank account statement allows you to uncover problems. Bank automation and human error can cause transposed numbers, incorrect deposit allocations and other errors that can affect your checking account total. A monthly bank reconciliation ensures that problems are discovered quickly, and routine reviews decrease the time it take to analyze your account. Monthly bank reconciliations can also keep you from missing any deadlines for reporting discrepancies to your bank.

The bank reconciliation is a process by which to compare an entity's book cash 

balance with the bank's cash balance as of a given period so as to note any 

discrepancies.

Tge true purpose of Bank recon is prepared to explain the difference between the cash balance on the books and on the bank statement. Thus, an examination of the debit and credit memoranda returned with the bank statement reveals a credit memoranda showing that the bank had collected a note from and thus credited the amount collected.

To find out the difference between bank balance and the balance as per company ledger

2 .to identify the reason of differences .

To ensure that the balance as per the company bank books and the bank balance are matched and to identify the transactions pending realisation.