What is Reconciliation Statement With An Example

A reconciliation statement is a document that explains the difference between two sets of financial data. It is often used to reconcile the balance in a company's bank account with the company's financial records.

For example, ABC Company is preparing a reconciliation statement to compare its financial records with the balance in its bank account. The company's financial records show that the balance in the bank account should be $50,000. However, when the company checks the actual balance in the bank account, it is $47,500.

To begin the reconciliation process, ABC Company must identify the cause of the $2,500 discrepancy. After reviewing its financial records and bank statement, the company discovers the following:

• There was an error in the company's records, where a payment of $500 was recorded twice.
• A check for $1,000 was written and recorded in the company's records, but it was never cashed by the recipient.
• The bank charged the company a fee of $100 for insufficient funds.

After adjusting for these discrepancies, the company's revised financial records show a balance of $48,400. When this amount is compared to the actual balance in the bank account ($47,500), there is still a discrepancy of $900.

To complete the reconciliation statement, ABC Company must investigate this remaining difference. After further review, the company determines that there was an additional bank fee of $400 that was not recorded in the company's records.

With this information, ABC Company can prepare a reconciliation statement that explains the difference between the two sets of financial data. The statement might include the starting balance, any deposits or withdrawals, and the ending balance. It would also include a detailed breakdown of the transactions that were included in the reconciliation process, such as the error in the company's records, the uncashed check, and the bank fees.

The purpose of the reconciliation statement is to ensure the accuracy and completeness of ABC Company's financial records. By identifying and resolving any discrepancies, the company can prevent errors and fraud from going undetected and ensure that its financial data is accurately reflected in its financial statements.

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