A bank reconciliation is the balancing of a company’s cash account balance to its bank account balance.
A nice video to watch before you go further..
A businessman maintains cash book with bank column to record cash and bank transaction i.e. deposits and withdraws during the course of business. He balances his cash book with bank column on regular basis may be weekly, monthly or even daily.
When an account is open, bank issue a bank passbook which is a true copy of the transaction recorded in the books of the businessman. Bank passbook is maintained by the bank for the businessman.
Theoretically, the passbook and cash book with bank column must always tally at any time. But in practice quite often the balance of both these books documents does not tally.
Thus it can be defined as the statement which is prepared for verifying and reconciling (An accounting process used to compare two sets of records to ensure the figures are in agreement and are accurate). the bank balance, shown by the cash book and passbook on a certain day and incorporates the reason of disagreement between them is called a bank reconciliation statement.