Bank reconciliation: what it is, types and benefits

For accounting services in Bogotá, the activity of bank accounts is seen as one of the most significant and delicate items. Reason why they bank reconciliations to audit related accounts and verify possible differences between registered values. The bank reconciliation is one of most important tools to control your organization.

What is a bank reconciliation?

We can define a bank reconciliation as the process that allows the balances recorded in the accounting entries to be compared or analyzed against the balances recorded in the bank activity or bank statements of the financial entities with which the company operates. In other words, it is the process in which each of the items recorded in the company’s books are reviewed in order to verify that there are no duplicate, erroneous or pending items to be recorded at the end of a specific period.

Normally, the process begins once the registration of all the accounting transactions by the accountant in Bogotá, which originate a charge or credit in the company’s bank accounts, has been completed. Next, the bank general ledger is compared with the bank statement and a reconciliation or differences are determined. Finally, the how the reconciliation items are independently established.

What are the types of bank reconciliations?

There are two kinds of reconciliations. Next, its details.

Individual reconciliation

It consists of adjusting the balances, that is, starting from the balance of the company’s books, the items that differ are determined to arrive at the balance indicated in the summary of the bank statement. To dosso is necessary to carry out all the accounting adjustments related until the balance of the bank book is updated and balanced. The reconciliation will be terminated when all the pertinent adjustments for the verified period have been made.

Joint conciliation

This reconciliation is different because it focuses on determining who is responsible for the differences or reconciling items. To do this, a document is drawn up, detailing all the items that require a review, which will then serve as support for the drafting of the “correction policies.” Those responsible are determined, be it the bank or the company, to make the respective corrections.

What are the benefits of making these reconciliations?

• Better control of financial resources. The periodic review of bank statements and accounting books offer a control of the economic resources of the company. It offers a clearer, more realistic and concise picture of the financial statements as of a certain date.
• Accounting up to date. To periodically carry out bank reconciliations, it is mandatory to keep accounting records up to date, which ensures a more controlled dynamics of accounting.
• They offer security before the inspection of a controlling entity. The control and detection of errors or imbalances derived from the reconciliation allows that, in the event of an inspection by any regulatory entity, there is the security and certainty that the accounting reflects reality without mismatches and problems, errors or omissions.
• Up-to-date information for decision-making. Information is power, but it is useless if it does not reflect the reality of the company. When you go through the reconciliation process, any errors are determined early and corrected. Consequently, better decisions can be made based on truthful, real and up-to-date information.

In summary, bank account reconciliation is one of those processes that, despite not being mandatory, it is highly recommended to do it, regardless of whether we have a large company or an SME. It allows us to justify all the movements and imbalances that occur in the bank accounts of the organization and helps to correct them in a timely manner.