Bank Reconciliation Statement: A statement prepared to reconcile the bank balance as per cash book with the balance as per passbook or bank statement, by showing the items of difference between the two accounts.
Causes of difference:
- timing of recording the transaction.
- error made by business or by the bank.
Correct cash balance: It may happens that some of the receipts or payments are missing from either of the books and errors, if any, need to be rectified. This arise the need to look at the entries and errors recorded in both statements and other information available and compute the correct cash balance before reconciling the statements.