What is the primary purpose of a bank reconciliation?

The primary purpose of a bank reconciliation is to align company records with bank statements. Bank reconciliations are essential for ensuring that the amounts recorded in a company's accounting books match the amounts reported by the bank. This process involves identifying any discrepancies between the company's cash records and the bank's statements, which can arise due to outstanding checks, deposits in transit, bank fees, or errors in either record. By performing a bank reconciliation, the company can resolve these differences, maintain accurate cash balances, and ensure the integrity of its financial reporting.

This alignment helps in identifying errors or fraudulent activities and assists management in understanding the company's cash position more clearly. A well-maintained reconciliation process is critical for effective cash management and financial decision-making.