Bank Reconciliations

What are bank reconciliations?

Bank reconciliations are prepared to ensure that the balance in the cash book of a business is reconciled to the balance on the bank statement provided by the bank.

For example, if a business writes a cheque, it will post it to its cash book that day and then send it on to its supplier. The supplier will receive the cheque days later, and send it on to its bank. The cheque then passes through the banking system and eventually, a few more days later, it is processed by the bank of the business and posted to its account (bank statement).

During the period of days between the business posting the cheque and the bank posting the cheque the item is in the cash book not on the bank statement and is therefore a reconciling item to be included on bank reconciliations.

For further information on bank reconciliations see the Wikipedia definition.

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Last modified March 23rd, 2016 by Michael Brown

About the Author

Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.

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