What is a bank reconciliation statement?

A bank reconciliation statement is a document prepared by businesses to match their own accounting records with the bank’s records for the same period. It helps identify differences caused by factors such as cheques issued but not yet cleared, deposits in transit, bank charges, interest credited, or errors in recording. This process ensures that the company’s cash book and the bank’s passbook reflect the same balance. By preparing it regularly, organizations can detect fraud, avoid overdraft issues, and maintain accurate financial records. The reconciliation process typically involves adjusting the company’s ledger or the bank statement until both balances agree. It is an essential internal control tool in accounting and financial management for accuracy and transparency.