The process of comparing two sets of records to ensure they agree and identify any discrepancies, most commonly matching internal accounting records with bank statements.
Reconciliation is a critical accounting control process. Bank reconciliation (most common) compares the company's cash book with bank statements. Other types include: inter-company reconciliation, vendor statement reconciliation, inventory reconciliation (physical vs book), and GST reconciliation (GSTR-2B vs purchase register). Discrepancies arise from timing differences (cheques in transit), errors (wrong amounts), omissions (bank charges not recorded), and fraud. Regular reconciliation catches errors early, prevents fraud, and ensures financial statement accuracy.
Bank reconciliation for April: Cash book balance ₹5,00,000. Bank statement balance ₹5,25,000. Difference ₹25,000 explained by: Cheques issued but not cleared ₹30,000, Bank interest credited ₹5,000, Bank charges not recorded ₹(200). Adjusted balances match: ₹5,04,800.
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Bank reconciliation: monthly at minimum, weekly for high-volume businesses. GST reconciliation: monthly (before GSTR-3B filing). Inventory: quarterly physical counts. Modern software like Laabam.One enables real-time auto-reconciliation with bank feed integration.
Timing differences (cheques not cleared, payments in transit), bank charges/interest not recorded, direct debits/standing orders missed, errors in recording amounts, duplicate entries, and fraudulent transactions. Most differences should have legitimate explanations.
The process of comparing and matching a company's accounting records with its bank statement to identify and resolve any differences.
A periodic document issued by a bank summarizing all transactions (deposits, withdrawals, fees, interest) in an account over a specific period.
The master accounting record that contains all financial transactions of a business, organized by account.
A chronological record of all transactions and changes made in an accounting system, providing a traceable path for verification and compliance.
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