Bank reconciliations are those effective measures put in place to eliminate accounting fraud. They do ensure that financiers detect errors in banks and accounting by providing clear reports in cashbooks and bank balance strategic position in accordance with bank statement. Particularly, they ensure that bank transactions have been reviewed in a proper way hence less or no errors made in place. Record s of the bank statements are put in account to ensure completeness and payments and receipting of the book of account1. On the other hand, balance deficit and credits are recorded to check whether the business organization is stable or not. Therefore, any balance different should be put forward between accounting records and bank statements to be adjusted in a positive manner to avoid financial chaos.
There is need for effective control procedures to put in place such as risk assessment. It plays a significant role in enabling managers to identify risk that may occur in any business plant. In this case, the necessary account is taken on spot. On the other hand, monitoring and reviewing of the management should periodically review the ongoing activities to ensure better work output. In addition, control environment is created and managed through communication and intentions primarily focused on managing all the procedures. In addition, the information and communication play a significant role in enabling the clearance of the output of evident plan of the organization system.
Use your promo and get a custom paper on
"Bank Reconciliation".
Generally, bank reconciliation have positive effects to both internal and extending the external investors. First, they help to control and protect assets from accidental loss due to fire outbreak or any related fraud. Second, they ensure order plan accounting records security and business reports are reliable and integral. Third, they help in protecting a better working environment to managers and hence maximizing the efficiency and effectiveness of their operations1. Lastly, they ensure compliance to university institution and local laws and regulations influencing operation of the business organization.
Noteworthy, the separation of duties needed is created as one person accounting department, two person accounting department and three or more accounting department1. For instance, in the accounting department, there is need to have someone outside the department or CEO to process the financial documentaries and further sign them. With two people, accounting department, have different persons outside department to prepare, approve and signing of the suggested records. With three people in the accounting department, one person is tasked with processing payables, makes deposits and prepares bank reconciliation. On the other hand, another person with limited access to accounting software is tasked with the role of signing the checks, while others are required to review the document.
There are various steps for documentation process. This includes the bank statements, reconciliation report and the balance sheet, which are required. With this taken for comparison, the purpose of account balance can be determined. Second step with these three documents in hand, the statement ending balance; adjustments of book balances are made. Third, checks and payments be cleared, credits and deposits be cleared before handing to next step. The forth step involves reviewing processes and any questioning the item, which are put in account. Lastly, keep records and saving the evidence that correspond to the financial documents.
