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Bank Reconciliation Statements
Reconciliation of cost and financial accounts is done on the principle of bank reconciliation statement. One may begin with profit as per the financial books or cost books and thereafter items causing differences in profit may be added or deducted depending on the circumstances. After all such items have been considered, profit as per other books may be arrived at.
Need and Importance
After tracing the various items of difference, a bank reconciliation statement is prepared.
The following are its advantages in which lies its importance.
i. The errors that might have taken place in the cash book in connection with bank transactions can be easily found.
ii. Regular preparation of bank reconciliation statement prevents frauds.
iii. It indirectly imposes moral check on the accounting staff.
iv. By the preparation of bank reconciliation statement, uncredited cheque can be detected and steps can be taken for their collection.
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