what is a bank reconciliation statement 
a company prepares a bank reconciliation statement to compare the balance in its accounting records with its bank account balance the statement shows reasons for any discrepancies between the two a bank reconciliation statement is a valuable internal tool that can affect tax and financial reporting and detect errors and intentional fraud understanding the bank reconciliation statementreconciliation is the process of comparing two different records a bank reconciliation statement can help you identify differences between your company s bank and book balances in this case the reconciliation includes the deposits withdrawals and other activities affecting a bank account for a specific period any discrepancies lead to making necessary adjustments or corrections 1here are other uses of a bank reconciliation statement bank reconciliation statements ensure that payments were processed and cash collections were deposited into the bank bank reconciliation statements are often used to catch simple errors duplications and accidental discrepancies some mistakes could adversely affect financial reporting and tax reporting without reconciling companies may pay too much or too little in taxes 2bank reconciliation statements are effective tools for detecting fraud theft and loss for example if a check is altered the payment made for that check will be larger than you anticipate if you notice this while reconciling your bank accounts you can take measures to halt the fraud and recover your money 3however you typically only have a limited period such as 30 days from the statement date to catch and request correction of errors 4financial statements show the health of a company or entity for a specific period or point in time accurate financial statements allow investors to make informed decisions the statements give companies clear pictures of their cash flows which can help with organizational planning and making critical business decisions an accountant typically processes reconciliation statements at least once a month for a company software that automates bank reconciliation can help reduce errors associated with manual processing make sure that any staff or employee reconciling bank accounts doesn t also have access to funds through means such as deposits accounts payable or electronic fund transfer authorization 5