When the balances as per bank day book and the pass book or bank statement do not match then to know the reason of the differences, a statement is prepared. This statement is called bank reconciliation statement. When we get the bank statement or bank pass book then we check all the entries with the entries of bank day book. If some entries are not matching with each other then those entries are noted separately. We have to consider the balance of bank day book or bank statement as base to prepare the bank reconciliation. If we add or subtract the differences as the case may be, in the base balance, the balance of both parties must tally. It is called statement of bank reconciliation.

By preparing the bank reconciliation statement the adjustment entries are also passed in the company’s books. If there is any mistake from bank’s side then the bank is informed to correct the account at their end. Normally, the bank reconciliation is prepared at the end of every month but it can be prepared at any time keeping in view the urgency of information required by the management or keeping in view the quantum of transactions. By all means the bank reconciliation is very important to see the correctness of bank transactions and to make adjustment accordingly.