Tel: (44) 20 363 72042 | Mail:

News Blog

Why Bank Reconciliation Is So Important

Bank reconciliation is a check and control procedure of the accounting system aimed to verify that the bank balance of the company’s bank statement match and so can be “reconciled” with the balance stated in the company’s accounting records. It is likely that the two balances (the one from the company’s bank statement and the one from the company’s accounting record) do not match. This discrepancy may be due to time differences (like bank holidays or bank working days to process specific transactions) or simply because some transactions are automatically executed through the bank statement without passing through the company’s accounting records (like bank service charges, interests paid and received).

Because It gives information about the ending result of a business transaction, if effectively completed or still pending. It gives the possibility to identify unrecognised items and consequently to investigate the reason behind unknown transaction (for ex. a cash withdrawal made by the director of the business; this transaction has to find a “match” with the records entered in the accounting system, for ex. a specific invoice paid in cash).

It allows the possibility to identify errors occurred in the normal recording of the operations within the company’s accounting system. It allows the possibility to detect unauthorized bank withdrawal.

Everything considered, bank reconciliation gives a control mechanism to truck the cash flow of the company which in the end is the most vulnerable assets of a business


Write A Comment


Why keeping accounting records?

Either if they are individuals, a partnership or a company, every business needs to keep records of their transactions.

Continue Reading »