Hello Sir/Madam,

I want to know what is the meaning of Reconciliation of bank account. And why should we reconcile a bank account.

Thanking you,

Regards,
Sumit

A bank reconcilliation is used to settle differences between your bank statemnt and your organization's cash account on your books. Once the bank reconciliation is completed both your bank balance and your book balance must equal, which indicates that the bank balance and your book balnce is correct.

You should do a bank reconciliation because there may be items in your bank balance that have not been included in your book balance such as; interest, bank fees, collection on CD's etc. Also you may have made a transposition error in recording deposits or on checks.

Here we got two perspectives:-

1) The BANK'S books, and
2) The FIRM'S books.

At any time the balances on these two
Different books may differ.
By means of a reconciliation they should be
Brought into equilibrium.
The differences are mostly due to a lag in time between them.
Once you update both with all the knowledge
Available you make them balance or
RECONCILE.