DEFINITION OF BANK RECONCILIATION

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In accounting, reconciliation is the process of ensuring that two sets of records (usually the balances of two accounts) are in agreement. Reconciliation is used to ensure that the money leaving an account matches the actual money spent. This is done by making sure the balances match at the end of a particular accounting period. A bank reconciliation is a process that explains the difference on a specified date between the bank balance shown in an organization's bank statement, as supplied by the bank, and the corresponding amount shown in the organization's own accounting records.

A bank reconciliation statement is a summary of banking and business activity that reconciles an entity's bank account with its financial records. The statement outlines the deposits, withdrawals, and other activities impacting a bank account for a specific period. A bank reconciliation statement is a useful financial internal control tool used to thwart fraud.

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