Explain the importance of preparing regular bank reconciliation statements

i) There is need for an entity to keep abreast with bank transactions directly affecting this entity‘s operation. Bank charges and standing orders never get to reach the client‘s cashbook until a bank reconciliation is carried out.
ii) Uncredited deposits. Certain payments by customers using cheques will be recorded in the cashbook, but before the cheque reaches the bank, there will be inconsistent balances between cash book balance and bank balance hence a need for reconciliation.

iii) Unpresented cheques. These also need to be reconciled since the accounting year end may arrive before a certain cheque issued to a customer and credited as such in the cashbook, has not been presented for payment by customer for whichever reason hence inconsistent balances between entity‘s cash book and their bank.
iv) Direct Deposits. These are, for instance monies received by an entity through its bank account without prior notice. This receipt will thus not be reflected in the cash book until a bank statement is received when reconciliation can be done.
v) Bank reconciliation statements clear any misunderstandings between the entity and their bank since all transactions by both parties are accounted for in one statement for sake of clarity.
vi) Assist in the prevention of fraud. This is because, any discrepancy that causes mis- match between bank balance and cashbook balance will be thoroughly scrutinized, hence making it undesirable for one to commit fraud.

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