A bank reconciliation statement is generally prepared to compare your records i.e., the cash transactions with the bank, and identify if there are any differences between the two. With that being said, it is extremely common to see differences in the balance. Tracking down these differences and adjusting them in your records is extremely important. Ignoring these differences might result in a huge variance between the amount of cash you think you have, with the amount in the bank. This might result in an overdrawn bank account, overdraft fee, etc. There are chances where the bank might even opt to shut down your bank account.
Fraud detection, a key reason to prepare a BRS
Preparing a bank reconciliation statement helps you know if customer cheques have bounced, or if the cheques issued were stolen or altered, or even cashed without your knowledge. If you notice fraudulent transactions happening then it is recommended to reconcile the bank statement daily. During the end of the financial year when it is time for an annual audit the auditors examine the company’s bank reconciliation statement as a part of the testing procedure. Hence, it is important to complete bank reconciliation. A few areas where the records might vary from the records maintained by the bank are fees, NSF checks, and recording errors.
The purpose of preparing a bank reconciliation statement
- Track if there are any differences by comparing the company’s cash book with the bank’s passbook.
- Adjust the bank balance in your firm’s cash book if there is any difference found in the balances as per the cash book and the passbook.
- To keep a track of the cheques bounced, cheques altered, stolen, or cashed without your knowledge.
- Detect fraudulent transactions if any.
- Help auditors with the annual audits.
- Maintain a track of the company’s accounts payable and receivable.
A few organizations consider preparing a BRS daily. It is mostly recommended if the company is working with minimum cash reserves. This is done by accessing the updates in the bank records through the bank’s website. Preparing a BRS frequently is necessary if you suspect any fraudulent activities happening. We can help you prepare a BRS, identify and help avoid fraudulent activities. Contact Park Intelli’s professional today for more help.