Explain Bank Reconciliation Statement. Why is it prepared?

A bank reconciliation statement is a statement prepared to reconcile the balances of the concern’s cash book and the bank’s passbook at regular intervals. The entries in the cash book are compared to the entries in the passbook at the end of each month. The causes of the disparities in the books’ balances are investigated, and then a reconciliation statement is created. This statement is prepared once a month for a specific reason. It’s designed to show what’s causing the discrepancy between the amounts in the bank columns of the cash book and the bank passbook on a given date.

A bank reconciliation characterizes the difference between the company’s General Ledger balance and the Bank Statement.

Timing issues are identified (I.e., deposits in transit, uncleared checks, etc) and adjustments such as bank fees.

The net result should bring the bank balance to an adjusted amount equalling the General Ledger balance.