What is the purpose of Bank Reconciliation?

A Bank reconciliation is a process that explains the difference between the bank balance shown in an organisation's bank statement, as supplied by the bank, and the corresponding amount shown in the organization's own accounting records at a particular point in time.

Bank Reconciliation is a statement prepared to identify the difference between the Bank balance and companies ledger balance and find out the reason for those outstandings.

A Bank Reconciliation is a tool for verifying that the cash recorded in the company's books is matched or balanced with the actual cash per bank statement.  This is an effective tool for checking an asset susceptible to theft if appropriately accounted for.  Book records or accounting records of cash will always be different from that reflected per bank statement as some deposits are pending credit to the company's bank account and some company issued checks are pending clearance.  Moreover, there are charges or interest recorded by the bank that were not immediately recorded in the books (i.e. interest, withholding tax).