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Advantages And Disadvantages Of Reconciliation In A Company And A Bank Account

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A Company operates a bank account in which the company deposits and withdraws money from time to time. The company maintains the bank book as a column in the cash book. The Company gets the pass book from the bank in which the entries are recorded according to the bank. There are two sources for a business to find out the balance at bank. One is the bank column of the cash book maintained by the company or if the company does not maintain the bank column, the information can be collected from the bank ledger maintained in the books of account. The other way to find out the balance is by looking into the pass book or the statement rendered by the banker to the company. There might be a difference in the amounts shown in the bank book of the company and the pass book provided by the bank. To reconcile both …show more content…

These errors can include addition and subtraction errors, double payments to the vendor, lost cheques and missed payment. The company might have recorded an invoice as paid in its general ledger, but a bank reconciliation might reveal that the company forgot to write the cheque. At times, the bank might make an error in the company’s favour. The company will be liable for returning that money, even if it has already spent it.

 Payables tracking: A bank reconciliation statement helps in tracking the payments made to the vendors. Sometimes the payment has been made from the company’s end and the entry for that payment is made is made in the bank book or the bank ledger of the company but the bank has not yet approved the transaction and the amount has not been transferred to the vendor’s account. In this case, the company can directly contact the bank and ask the bank to execute the payment. If the vendors complain about not receiving the payment, the company will have the exact reason to give to the

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