What Is The Importance Of The Bank Reconciliation Statement?

What Is The Importance Of The Bank Reconciliation Statement?

The bank reconciliation statement reconciles an entity’s bank account with its accounting records by comparing banking & business transactions. It is one of a company’s most basic accounting documents. The statement summarizes a bank account’s deposits, withdrawals & other transactions over a specified period. Bank reconciliations ensure that data from bank records & a company’s internal financial records are accurate. A reconciliation control is by its very nature detective, discovering problems like fraud, errors, & missing items & most importantly, ensuring that the cash on the balance sheet is correct. Because transactions may occur on the actual statement date, the accountant usually prepares the bank’s reconciliation statement, which includes all transactions from the previous day. All deposits & withdrawals that have been posted to the account must be on hand to prepare the reconciliation statement.  Bank reconciliation provides numerous advantages for your company. They are:

Easy Management of Flaws

The drafting of a bank reconciliation statement is regarded as a crucial & appropriate maintenance strategy. With its assistance, a corporation may prevent any financial wrongdoing performed by fraudulent employees & handle such situations by implementing efficient steps to address such flaws. This statement also detects fraud in the case of bank drafts, cheques, or other types of financial transactions.

Checking the Accuracy of the Cash Book

Because the information offered in these books satisfies a company’s management needs, a comparison of either of these record books is deemed required. Both the cash books & the passbooks are kept in good order, & any errors that occur while posting the entries are identified & repaired.

Fraud & Theft Are Being Monitored

A corporation can maintain track of its transactions & keep eyes on its personnel by making regular comparisons with the use of a passbook & cash book. These checks are extremely useful in identifying employees who misappropriate corporate assets or engage in fraudulent behaviour. Because these comments are made at regular intervals, such as daily, weekly, monthly, corporations can use both books to examine & evaluate them regularly to assess them for money laundering.

Recognizing the Causes of Check Clearance Delays

The date of deposit of the cheque & the date of its clearance can be determined by comparing cash balances and bank account statements. If there is a large delay, the source of the delay can be identified and remedial action can be done.

Detecting Errors in The Passbook & The Cash Book

The bank reconciliation statement is created only after a thorough comparison of the records & information in the passbook with the details in the cash book. This comparison aids in identifying & showing any disparities in entries between the passbook & the cash book that may have been entered incorrectly or omitted.

In a nutshell,

Account reconciliation is the act of evaluating an organization’s financial records in order to detect any discrepancies and, if necessary, reconcile them to improve future financial planning. Two sets of records or the balances of two accounts must agree for an effective account reconciliation procedure to work. By following the reconciliation process, a corporation may ensure that the money leaving an account matches the actual money spent. Legal concerns, maintaining the confidentiality of crucial data, & the risk of fraud & corruption are all major risks for SMEs & MNCs in the UAE. Companies with a large number of transactions, whether online or by cash/cheque deposits & withdrawals, will find the accounting department’s task to be time-consuming. In these circumstances, outsourcing the bank reconciliation process is the best option.

If you’re seeking the best bank reconciliation services in the UAE, contact us, ARC Associates! We’re the leading account reconciliation service in the UAE, and we provide the best account reconciliation services in this respect to erase and eradicate these problems. We ensure that the actual account balance meets the relevant bank statement through our skilled account reconciliation services, avoiding fraud & legal difficulties & allowing our customers to concentrate solely on their corporate goals. Account reconciliation services from a financial specialist like ARC Associates assure not only the correctness of your company’s financial statements but also comply with regulatory & statutory obligations.