What is the purpose of bank reconciliation?

The purpose of bank reconciliation is primarily to ensure that the bank records align with the bank statements. This is a critical process for maintaining the accuracy of financial records. Proper reconciliation helps identify any discrepancies between the transactions recorded in the bank's internal records and those listed on the bank statement. By comparing these two sets of records, any errors, such as missed deposits, bank charges, or unauthorized transactions, can be detected and addressed promptly.

Bank reconciliation is a part of good financial management because it ensures that all financial activities are accurately recorded, which is essential for preparing reliable financial reports. It also plays a crucial role in safeguarding against fraud and maintaining the overall integrity of a bank's financial systems.