What is main need of Bank Reconciliation

Statement? And why you should do it?


A bank reconciliation statement is a detailed record that includes the comparison of the cash balance on a company’s balance sheet in connote to the amount on the bank statement.  

This reconciliation helps the two accounts to identify whether any accounting changes are needed to be made. Let’s know why your business needs bank reconciliation statement-:    

1. To detect errors- 

A bank reconciliation statement helps you in observing any accounting errors that business finds difficult to spot. These errors are related subtraction, addition and double payment that is being entered or any transaction that has been missed. And if any error is detected then the accountant tries to prevent errors from happening. And due to this future policies can be improved as well.   

2. Accuracy- 

The passbook of the bank and the cash book of a firm are being prepared every single month and the amount that is present in the cashbook, also considered to be the balance in the bank on that particular date. However, due to some reasons like delay in the time of recording balances of the two books would just not match. 

So, having prepared a bank reconciliation statement, reasons can be determined for the difference of the two balances. And also the accurate amount in both of the books- cash book of the firm and the passbook.    

3. Rectifying incorrect entries- 

An incorrect entry in the passbook and the cash book when found by an accountant has to getrectified. And an accountant because of the rectification tries to make sure that such mistakes are not happening in the future. A cheque has been issued but the payment of the same has not been made yet is an example of incorrect entry and it can be rectified accordingly.    

4. Detecting the reason for delays- 

With the help of an efficient bank reconciliation statement, you can find the cheques thatshow that it got deposited but still the amount has not been credited in the bank yet. Bank reconciliation helps in finding the absolute difference in the cashbook and the bankbook. 

Hence, this difference helps in detecting the delays in the bank balance of both. So, those cheques that got deposited but not yet credited or collected can come to notice quickly.   

5. Dishonest employees can be found- 

Yes you readit right, preparation of regular bank reconciliation statements can help tofind dishonest employees. Being one of the important needs of a bank reconciliation statement, it acts as a genuine moral check on employees. It also helps in finding if any employee is involved in any misappropriation, theft etc. 

And it helps in avoiding loss that could have been caused to the firm. This is wholly because even a cheque that does not have a very big amount on it can come in detection.   

6. Updated cash book- 

Due to reasons listed above it is quite possible that the cash book is failing to show the updated balance of the bank account of a particular date. But with the help of the Bank Reconciliation statement such entries that are responsible for this mistake can be identified. And after identification it is getting recorded in the cash book instantly. 

This helps in reconciling the balances of both the cash book and the bank book on the spot.   


Bank reconciliation statements prove to be very important for the accounts of individuals and firms both. It is a definite step towards the preparation of a statement with full accuracy and without any errors. Maintaining a statement is a tedious job. Many bookkeepers are ready to provide their financial services to small businesses

Various Bookkeeping services in California are having one on one meeting with their clients to properly understand their need sand fulfill them. 

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