Bank Reconciliation Statement

What is a Bank Reconciliation Statement?

A Bank Reconciliation Statement (BRS) is a financial document that compares a company’s recorded cash balance with the balance shown on its bank statement. It identifies discrepancies caused by timing differences, errors, or unrecorded transactions.

Key Takeaways

• Ensures accuracy of cash records.
• Identifies timing differences, errors, and unrecorded transactions.
• Essential for internal control and fraud prevention.
• Prepared monthly, weekly, or daily depending on business needs.

Understanding Bank Reconciliation Statements

Differences between company ledgers and bank statements arise due to timing delays (such as deposits in transit or outstanding checks), bank charges, interest income, or errors on either side. A BRS ensures all such differences are accounted for.
The reconciliation process strengthens financial integrity and helps detect fraudulent activity, unauthorized withdrawals, and bookkeeping mistakes.

Formula (If Applicable)

Adjusted Cash Balance = Bank Statement Balance ± Adjustments = Book Balance ± Adjustments

Real-World Example

• A company issues checks that have not yet cleared, creating differences.
• Bank deducts charges or adds interest not yet recorded by the business.
• Deposits made at month-end appear in the bank statement the following month.

Importance in Business and Economics

Bank reconciliations minimize financial risk by ensuring accurate cash reporting. They support audit readiness and strengthen internal controls, ultimately contributing to trustworthy financial statements.

Types or Variations

Related Terms

• Cash Book
• Ledger
• Internal Controls

Sources and Further Reading

• IFRS: Cash and Cash Equivalents Guidelines
• AICPA Internal Control Framework
• Investopedia: Bank Reconciliation

Quick Reference

• Core Concept: Matching company cash records with bank statements.
• Key Benefit: Financial accuracy and fraud prevention.

Frequently Asked Questions (FAQs)