How to Reconcile a Bank Statement: Your Comprehensive Guide to Financial Accuracy

In the world of business and personal finance, maintaining accurate records of your cash is paramount. One of the most fundamental and critical tasks in achieving this accuracy is bank reconciliation. This process involves comparing your internal financial records (often kept in a ledger or accounting software) with the transactions and balances reported by your bank on a bank statement. The goal is to identify and explain any differences, ensuring that both sets of records reflect the true amount of cash available to you or your business. Without regular and meticulous reconciliation, you risk operating with an incomplete or misleading picture of your financial health, opening the door to errors, missed opportunities, and even fraud.

Many people wonder, how do I do a bank reconciliation? or how do you reconcile a bank statement? While it might seem daunting at first, especially if you’re new to accounting, the process is systematic and, once understood, becomes a routine and invaluable part of financial management. This comprehensive guide will walk you through the essential steps of how to reconcile a bank statement, explain the common reasons for discrepancies, highlight the significant benefits of this practice, and discuss how modern technology can streamline the entire bank reconciliation process. By mastering this skill, you’ll gain greater control over your finances and ensure the integrity of your financial data.

Understanding the Essence of Bank Reconciliation

Before diving into the practical steps, it’s crucial to grasp the core concept of bank reconciliation and its profound importance in financial management. It’s more than just matching numbers; it’s about verifying financial reality.

What is Bank Reconciliation? Defining the Core Process

At its heart, what is bank reconciliation? It is an accounting procedure that compares and contrasts the cash balance in a company’s (or individual’s) accounting records (often called the cash book or general ledger) with the cash balance shown on the bank’s statement for the same period. The objective is to identify any discrepancies between these two independent records and to make the necessary adjustments so that both balances agree. This agreement confirms that all cash transactions have been correctly recorded by both parties, providing an accurate picture of the cash available. This process is often summarized in a formal document known as a bank reconciliation statement.

Why Reconcile Bank Statements? The Importance of Accuracy

The question of why reconcile bank statements is answered by the multitude of benefits it offers for financial integrity and control. Regular reconciliation ensures that your financial records are accurate, reliable, and up-to-date. This accuracy is paramount for several reasons:

• Error Detection: It helps uncover mistakes made by either your business (e.g., incorrect entries, omissions, transposition errors) or the bank (e.g., incorrect debits/credits, processing errors).
• Fraud Prevention: By systematically reviewing all transactions, reconciliation acts as a critical internal control to detect unauthorized withdrawals, forged checks, or other fraudulent activities early.
• Accurate Cash Position: It provides the true, adjusted cash balance, which is essential for effective cash flow management, budgeting, and making informed financial decisions.
• Compliance and Auditing: For businesses, regular reconciliation is often a requirement for internal controls and facilitates smoother external audits, demonstrating good financial governance.

In essence, reconciling a bank statement is a fundamental health check for your cash, ensuring that your financial statements reflect reality.

Bank Statement vs. Company Books: Understanding the Two Sides

To effectively reconcile a bank statement, you must understand the two primary sets of records involved:

• The Bank Statement: This is a periodic summary provided by your bank, detailing all transactions that have cleared your account during a specific period. It includes deposits, withdrawals, checks paid, electronic transfers, bank service charges, and interest earned. The balance on the bank statement reflects the bank’s record of your cash.
• The Company’s Books (Cash Ledger): This is your internal record of all cash inflows and outflows. It includes all checks you’ve written, all deposits you’ve made, and any other cash transactions you’ve recorded. The balance in your cash ledger reflects your company’s record of its cash.

Differences between these two balances are normal and expected due to timing differences or errors. The bank reconciliation process is designed to explain these differences and bring the two balances into agreement, leading to a single, accurate cash figure.

Common Discrepancies: Why Your Books Don’t Match the Bank

When you begin to reconcile bank account balances, you’ll almost certainly find that your internal records don’t perfectly match the bank statement. These differences are usually due to specific types of common discrepancies, not necessarily errors.

Timing Differences: Transactions in Transit

One of the most frequent reasons for discrepancies is timing differences. These occur when a transaction has been recorded by one party (either your company or the bank) but has not yet been processed or recorded by the other party by the statement date.

• Outstanding Checks: These are checks that your company has written and recorded in its cash ledger, but which the payee has not yet cashed or deposited. Therefore, they appear as deductions in your books but are not yet reflected on the bank statement. When you reconcile bank statements, these will reduce the bank’s balance to arrive at the true cash.
• Deposits in Transit: This refers to cash or checks that your company has received and recorded as a deposit in its books, but which the bank has not yet processed or credited to your account. This often happens with deposits made late in the day or just before the bank statement cut-off. These will increase the bank’s balance during reconciliation.

These items are not errors; they are simply transactions that are “in transit” and will clear in due course. Understanding them is key to a successful reconciliation statement.

Bank-Initiated Transactions: Information from the Bank

Another common source of differences comes from transactions that the bank processes and records, but your company only learns about when the bank statement arrives.

• Bank Service Charges: These are fees charged by the bank for various services, such as monthly account maintenance, transaction fees, or overdraft charges. Your company typically records these only after reviewing the bank statement. These will reduce your book balance during reconciliation.
• Interest Earned: If your account earns interest, the bank will credit this to your account. Your company will record this income upon receipt of the bank statement. This will increase your book balance.
• NSF (Non-Sufficient Funds) Checks: Also known as “bounced checks,” these are checks received from customers that were deposited into your account but were returned by the customer’s bank due to insufficient funds. The bank will debit your account for the amount of the check and often charge a fee. Your company needs to reduce its cash balance and pursue collection from the customer.
• Electronic Funds Transfers (EFTs): This includes direct deposits from customers or automated payments (e.g., utility bills, loan payments) that are automatically debited from your account. Your company might not have recorded these until the bank statement provides the details.

These items require adjustments to your company’s cash ledger to bring it into agreement with the bank’s records.

Errors: Mistakes by Either Party

While less common with modern systems, errors can occur on either side, leading to discrepancies that need to be identified and corrected.

• Company Errors: These are mistakes made by your business when recording transactions. Examples include:
  • Incorrect Amounts: Recording $540 instead of $450.
  • Transposition Errors: Swapping digits, like entering $23 instead of $32. These often result in differences divisible by 9.
  • Omissions: Forgetting to record a deposit or a check entirely.
  • Duplicate Entries: Recording a transaction twice.
• Bank Errors: Although rare, banks can sometimes make mistakes, such as:
  • Incorrectly Debiting/Crediting an Account: Posting a transaction to the wrong customer’s account.
  • Processing a Check Twice: Accidentally deducting the same check amount multiple times.

Identifying and correcting these errors is a primary benefit of the bank reconciliation process, ensuring the integrity of your financial data. The reconciliation statement will clearly show these adjustments.

How to Reconcile a Bank Statement: A Step-by-Step Guide

Now that we understand the “why” and the “what,” let’s dive into the “how.” This section provides a practical, step by step bank reconciliation guide to help you reconcile a bank statement effectively.

Step 1: Gather Your Essential Documents

The first and most crucial step in how to do a bank reconciliation is to collect all the necessary paperwork. You’ll need two primary documents:

• Your Latest Bank Statement: This document, typically received monthly, provides a comprehensive list of all transactions processed by your bank for your account during a specific period. Ensure you have the complete statement, including the beginning and ending balances.
• Your Company’s Cash Ledger (or Cash Account Records): This is your internal record of all cash inflows (deposits) and outflows (checks, withdrawals, electronic payments). This might be a physical checkbook register, a spreadsheet, or the cash account within your accounting software (e.g., QuickBooks, Xero).

Having these two documents side-by-side is essential for the comparison process. Make sure the period covered by your internal records matches the period of the bank statement you are reconciling.

Step 2: Compare Beginning Balances

Before you start matching individual transactions, verify that the opening balance on your current bank statement matches the ending balance from your previous month’s bank reconciliation. Similarly, confirm that the beginning balance in your cash ledger for the current period matches the ending balance from your last reconciliation. If these starting balances don’t align, you’ll need to investigate the discrepancy from the prior period before proceeding. A mismatch here indicates an error in the previous reconciliation or an unrecorded transaction from the prior period.

Step 3: Tick Off Matching Deposits

Now, begin the detailed comparison. Go through the deposits listed on your bank statement and match them against the deposits recorded in your cash ledger. As you find a match, tick or mark off the transaction in both records. Pay close attention to the date and amount of each deposit.

• What to look for: Ensure that every deposit in your books appears on the bank statement, and vice-versa.
• Unmatched Deposits: If a deposit appears in your books but not on the bank statement, it’s likely a deposit in transit. Note this down. If a deposit appears on the bank statement but not in your books, investigate it immediately – it could be an unrecorded receipt, an error, or even an unauthorized deposit.

This systematic ticking process is fundamental to how to reconcile a checking account or any bank account.

Step 4: Tick Off Matching Withdrawals and Payments

Next, perform the same matching process for withdrawals and payments. Compare each check, debit card transaction, ATM withdrawal, and electronic payment listed on your bank statement with the corresponding entries in your cash ledger. Again, mark off each matching transaction in both records.

• What to look for: Verify that every withdrawal/payment in your books appears on the bank statement, and vice-versa.
• Unmatched Withdrawals: If a check or payment appears in your books but not on the bank statement, it’s likely an outstanding check or an electronic payment that hasn’t cleared yet. Note this down. If a withdrawal appears on the bank statement but not in your books, investigate it immediately. This could be a bank service charge, an NSF check, an electronic payment you weren’t aware of, or potentially an unauthorized transaction.

This diligent comparison is a core part of the bank reconciliation procedure.

Step 5: Identify and Adjust for Bank-Side Items (Adjusting the Bank Balance)

After ticking off all matching transactions, you’ll be left with a list of items that appear on one record but not the other. First, focus on items that appear on your company’s books but not on the bank statement. These are adjustments to the bank’s balance.

• Add Deposits in Transit: Add the total of all deposits you recorded that haven’t yet appeared on the bank statement to the bank statement’s ending balance.
• Subtract Outstanding Checks: Subtract the total of all checks you’ve written that haven’t yet cleared the bank from the bank statement’s ending balance.
• Adjust for Bank Errors: If you identified any errors made by the bank (e.g., a deposit credited to the wrong account), add or subtract the amount to the bank statement balance to correct it.

After these adjustments, you will arrive at an “Adjusted Bank Balance.” This is the first half of your reconciliation statement.

Step 6: Identify and Adjust for Book-Side Items (Adjusting Your Book Balance)

Next, focus on items that appear on the bank statement but not in your company’s cash ledger. These are adjustments that need to be made to your internal records.

• Subtract Bank Service Charges: Deduct any bank service charges or fees listed on the bank statement from your cash ledger balance.
• Add Interest Earned: Add any interest income credited by the bank to your cash ledger balance.
• Subtract NSF Checks: Deduct the amount of any NSF checks (bounced checks) and associated bank fees from your cash ledger balance.
• Add/Subtract Electronic Funds Transfers (EFTs): Record any direct deposits or automated payments that appeared on the bank statement but were not yet in your books.
• Adjust for Company Errors: If you identified any errors made by your company (e.g., incorrect amount recorded, omission), make the necessary correcting entries in your cash ledger.

After these adjustments, you will arrive at an “Adjusted Book Balance.” These adjustments typically require corresponding journal entries for bank reconciliation in your accounting system.

Step 7: Compare the Adjusted Balances

This is the moment of truth in how to reconcile a bank statement. Compare your “Adjusted Bank Balance” from Step 5 with your “Adjusted Book Balance” from Step 6.

• If they match: Congratulations! Your bank reconciliation is complete for the period. Both your records and the bank’s records now agree on the true cash position.
• If they don’t match: Don’t panic. This means there’s still an unidentified discrepancy. You’ll need to re-examine your work. Common places to recheck include:
  • Reviewing all un-ticked items for errors in amounts or dates.
  • Double-checking your additions and subtractions on the reconciliation statement.
  • Looking for a transposition error (if the difference is divisible by 9).
  • Scanning for a missing or duplicate entry of the exact difference amount.

Persistence is key to finding the elusive difference. The goal is always for the two adjusted balances to be identical.

Step 8: Make Journal Entries for Book-Side Adjustments

Once your adjusted balances match, the final step is to make the necessary journal entries for bank reconciliation in your company’s accounting system for all the “book-side” adjustments identified in Step 6. These entries bring your cash ledger balance into agreement with the true cash balance.

• For bank service charges: Debit Bank Service Charge Expense, Credit Cash.
• For interest earned: Debit Cash, Credit Interest Income.
• For NSF checks: Debit Accounts Receivable (from the customer), Credit Cash.
• For company errors: Correct the original entry as needed (e.g., if cash was overstated, credit cash; if understated, debit cash, and adjust the corresponding expense/revenue account).

These journal entries ensure that your financial statements reflect the accurate cash position, completing the full bank reconciliation process.

Benefits of Regular Bank Reconciliation: Beyond Just Balancing Books

The advantages of consistent bank reconciliation extend far beyond simply ensuring your ledger matches your bank statement. Regular reconciliation unlocks a host of benefits that contribute significantly to a business’s financial health, operational efficiency, and strategic capabilities.

Enhanced Cash Flow Visibility and Accuracy

Regular bank reconciliation provides an accurate, real-time (or near real-time, depending on frequency) picture of your available cash. By identifying and accounting for all outstanding checks, deposits in transit, and bank-initiated transactions, you gain a precise understanding of your true cash position. This enhanced visibility is crucial for effective cash flow management, allowing you to:

• Make Informed Spending Decisions: Know exactly how much cash you have before making purchasing or investment decisions.
• Optimize Liquidity: Ensure you have sufficient funds to meet immediate obligations without holding excessive idle cash.
• Improve Forecasting: Accurate current cash balances are the foundation for reliable future cash flow projections.

This clarity empowers better financial planning and reduces the risk of unexpected liquidity shortages, making your bank reconciliation statement a powerful tool.

Fraud Detection and Prevention

One of the most critical benefits of regular bank reconciliation is its role as a robust internal control against fraud. By systematically comparing your records with the bank’s, you can quickly identify:

• Unauthorized Withdrawals: Any debits on the bank statement that do not correspond to your records.
• Forged Checks: Checks that have been altered or created fraudulently.
• Duplicate Payments: Instances where the same transaction has been processed multiple times.
• Employee Theft: Discrepancies can reveal instances where employees might be diverting funds.

Catching fraudulent activities early minimizes financial losses and allows for prompt investigation and corrective action. It acts as a vital deterrent, safeguarding your assets and strengthening your overall financial security, making the bank reconciliation solution a key part of your fraud prevention strategy.

Error Identification and Correction

Human error is an inevitable part of any manual process. Regular bank reconciliation provides a systematic mechanism for identifying and correcting mistakes made by either your company or the bank. These errors can include:

• Posting Errors: Recording an incorrect amount, debiting instead of crediting, or posting to the wrong account.
• Omissions: Forgetting to record a transaction entirely.
• Transposition Errors: Swapping digits in an amount (e.g., $54 instead of $45).
• Bank Processing Errors: The bank incorrectly processing a deposit or withdrawal.

Timely error identification prevents these mistakes from compounding, ensures the accuracy of your financial statements, and avoids future complications. It’s a fundamental aspect of maintaining reliable accounting records, turning a potentially complex bank reconciliation problem into a manageable task.

Improved Financial Decision-Making

Accurate and up-to-date cash information, derived from regular bank reconciliation, is the bedrock of sound financial decision-making. With a clear understanding of your true cash position, management can:

• Optimize Investments: Identify surplus cash available for short-term investments to earn interest.
• Manage Debt: Determine the optimal time to pay down debt or secure new financing.
• Plan for Expenses: Accurately budget for upcoming expenditures and avoid overextending.
• Assess Performance: Evaluate the effectiveness of cash management strategies and make necessary adjustments.

This empowers strategic planning and ensures that business decisions are based on reliable financial data, fostering long-term stability and growth.

Streamlined Audit Processes

For businesses subject to internal or external audits, a consistent and well-documented bank reconciliation process significantly streamlines the audit process. Auditors rely heavily on accurate reconciliations to verify cash balances and assess the effectiveness of internal controls. When reconciliations are done regularly and discrepancies are promptly resolved and documented, it:

• Reduces Audit Time: Auditors can quickly verify cash figures, spending less time investigating discrepancies.
• Lowers Audit Costs: Less audit time often translates to lower audit fees.
• Enhances Credibility: Demonstrates strong internal controls and financial discipline to auditors, leading to a smoother audit and a more favorable audit opinion.

In essence, regular bank reconciliation makes the audit process less stressful and more efficient for all parties involved, providing a clear bank reconciliation report.

Challenges in Bank Reconciliation: Overcoming Hurdles to Accuracy

While the benefits of mastering how to reconcile a bank statement are substantial, the process is not without its challenges. Understanding these common hurdles is the first step toward finding effective bank reconciliation solutions.

Managing High Transaction Volumes

For businesses with a large number of daily or monthly transactions, manually comparing each entry on a bank statement with internal records can be an overwhelming task. The sheer volume increases the likelihood of human error and can lead to significant time consumption, causing backlogs and delays in completing the reconciliation. This is particularly true for retail businesses, e-commerce platforms, or any entity with frequent customer payments and vendor disbursements. The challenge isn’t just about finding discrepancies, but about efficiently processing the vast amount of data involved in the bank reconciliation process.

Dealing with Complex Discrepancies and Unidentified Transactions

Not all discrepancies are straightforward timing differences. Sometimes, transactions appear on the bank statement with vague descriptions, or they might be part of a larger, grouped transaction that is difficult to match individually. Unidentified deposits or withdrawals, particularly those from electronic transfers or direct debits, can be particularly challenging to trace without clear internal documentation or communication. Resolving these complex discrepancies requires investigative skills, access to detailed source documents, and often, communication with external parties like customers or the bank itself. This adds layers of complexity to the reconciliation statement preparation.

Overcoming Manual Process Inefficiencies

Many organizations still rely on manual methods, such as using spreadsheets or even paper ledgers, to perform bank reconciliation. This approach is highly inefficient and prone to errors. Manual data entry, the tedious process of ticking off matching items, and the difficulty of tracking unresolved discrepancies can consume significant staff time that could be better spent on higher-value financial analysis. These inefficiencies not only slow down the financial close process but also increase the risk of undetected errors or fraud, making the traditional how to do a bank reconciliation method less viable for modern businesses.

Ensuring Data Accuracy and Consistency

The effectiveness of bank reconciliation hinges on the accuracy and consistency of both the bank’s data and your internal records. Inconsistencies can arise from various sources: delayed recording of transactions in your books, incorrect amounts entered, or mismatched descriptions between systems. If your internal cash ledger is not promptly updated or contains errors, the reconciliation becomes a frustrating exercise in trying to match flawed data. Maintaining data integrity across all financial systems is a continuous challenge that directly impacts the ease and accuracy of the reconciling bank statements process.

Navigating Bank-Specific Formats and Data Feeds

For businesses operating with multiple bank accounts, a common challenge is dealing with varying bank statement formats. Different banks may provide statements in unique layouts or file types (e.g., PDF, CSV, proprietary formats). Manually extracting and standardizing data from these diverse formats can be time-consuming and error-prone. Even with electronic feeds, mapping the bank’s transaction descriptions to your internal accounting categories can require significant manual intervention. This lack of standardization adds complexity, especially when trying to implement a consistent bank reconciliation process across all accounts.

Optimizing the Bank Reconciliation Process: Leveraging Modern Solutions

To overcome the challenges and fully realize the benefits of bank reconciliation, modern businesses are increasingly turning to technology and best practices. Optimizing the reconcile bank account process is about efficiency, accuracy, and strategic insight.

Choosing the Right Reconciliation Frequency

The optimal frequency for bank reconciliation depends on your business’s specific needs, as discussed in detail in our previous article on “How Often Should You Do Bank Reconciliation?”. However, for most businesses, a consistent schedule is paramount.

• Monthly Reconciliation: This remains the most common practice, aligning with monthly financial reporting cycles. It’s a good baseline for most small to medium-sized businesses.
• Weekly Reconciliation: For businesses with higher transaction volumes or tighter cash flow needs, weekly reconciliation offers a better balance of control and effort, catching discrepancies sooner.
• Daily Reconciliation: Large enterprises, high-volume e-commerce, or businesses with significant fraud risk may opt for daily reconciliation, often enabled by advanced automation.

The key is to choose a frequency that allows for timely error detection and cash visibility without creating an undue administrative burden. The chosen frequency directly impacts the effectiveness of your bank reconciliation process.

The Power of Bank Reconciliation Software and Automation

The most significant leap in optimizing bank reconciliation comes from leveraging technology. Modern bank reconciliation software and accounting systems with integrated reconciliation modules can automate much of the process.

• Automated Data Import: Software can automatically import bank statements directly from your financial institutions via secure bank feeds, eliminating manual data entry.
• Intelligent Matching Rules: Advanced algorithms and configurable rules automatically match transactions based on criteria like amount, date, and description. This can include matching multiple small deposits to a single large deposit, or vice versa.
• Exception Handling: Unmatched or partially matched transactions are flagged as exceptions, allowing your team to focus only on investigating and resolving these specific items, rather than reviewing every single transaction.
• Real-Time Visibility: Dashboards provide immediate insights into your cash position, reconciliation status, and aging of unreconciled items.

Automation drastically reduces the time and effort required for reconciling bank statements, improving accuracy and freeing up valuable finance team resources for more strategic tasks. It transforms the question of how to reconcile a bank statement from a manual chore to an automated workflow.

Implementing Robust Internal Controls

Technology complements, but does not replace, the need for strong internal controls.

• Segregation of Duties: Ensure that the person responsible for recording cash transactions is different from the person performing the bank reconciliation. This separation minimizes opportunities for fraud.
• Regular Review and Approval: A senior finance professional should review and approve all completed bank reconciliation statements, especially for high-value accounts.
• Documentation: Maintain clear documentation for all reconciling items, including explanations for discrepancies and the steps taken to resolve them. This is crucial for audit trails.
• Timely Follow-Up: Establish protocols for promptly investigating and resolving all flagged discrepancies. The longer an item remains unreconciled, the harder it becomes to resolve.

These controls enhance the integrity of the bank reconciliation process and provide an added layer of security.

Continuous Monitoring and Improvement

Bank reconciliation should not be a static process. Regularly review your reconciliation procedures to identify bottlenecks, recurring issues, or opportunities for further automation.

• Analyze Discrepancy Patterns: Are certain types of errors or timing differences consistently occurring? This might indicate a need to adjust internal processes or communication with the bank.
• Leverage Reporting: Use the reporting features of your accounting software to track key reconciliation metrics, such as the number of unreconciled items, the time taken to complete reconciliation, and the types of discrepancies encountered.
• Stay Updated: Keep abreast of new features in your accounting software or emerging bank reconciliation solutions that could further streamline your process.

A commitment to continuous improvement ensures that your reconcile bank account process remains efficient, accurate, and aligned with your business’s evolving needs.

FAQs: Your Questions on Bank Reconciliation Answered

What is bank reconciliation and why is it important?

Bank reconciliation is the process of comparing your company’s cash records with your bank’s statement to identify and explain any differences. It’s important because it helps detect errors, prevent fraud, ensure accurate cash balances for decision-making, and supports financial audits.

How do I do a bank reconciliation step by step?

To reconcile a bank statement, you typically: 1) Gather your bank statement and cash ledger. 2) Compare beginning balances. 3) Tick off matching deposits. 4) Tick off matching withdrawals/payments. 5) Adjust the bank balance for items like outstanding checks and deposits in transit. 6) Adjust your book balance for items like bank service charges, interest earned, and NSF checks. 7) Compare the adjusted balances to ensure they match. 8) Make journal entries for book-side adjustments.

What are common reconciling items in a bank reconciliation?

Common reconciling items include: outstanding checks (checks issued but not yet cleared by the bank), deposits in transit (deposits made but not yet recorded by the bank), bank service charges, interest earned, NSF (non-sufficient funds) checks, and errors made by either the company or the bank.

How often should you reconcile your bank account?

Most businesses should perform bank reconciliation at least monthly, typically when the bank statement is received. Businesses with high transaction volumes or tight cash flow may benefit from weekly or even daily reconciliation, especially with the help of automation software.

What does it mean to reconcile a bank statement?

To reconcile a bank statement means to bring the cash balance in your company’s internal records into agreement with the cash balance shown on the bank’s statement. This involves identifying and accounting for all transactions and discrepancies that cause the two balances to differ, ultimately arriving at a true, accurate cash balance.

Can accounting software help with bank reconciliation?

Yes, accounting software significantly streamlines the bank reconciliation process. Most modern accounting software offers features for automated bank feeds, intelligent transaction matching, and exception handling, drastically reducing manual effort, improving accuracy, and enabling more frequent reconciliations.

What is the purpose of a bank reconciliation statement?

The purpose of a bank reconciliation statement is to provide a clear, documented explanation of the differences between the cash balance in your books and the bank’s records. It serves as a verification tool, ensuring the accuracy of your cash account, aiding in fraud detection, and providing reliable data for financial reporting and decision-making.