Bank reconciliation is the process of comparing two different records, the bank account balance in an entitys books of account and the balance reported by the financial institution in the most recent bank statement. The purpose of bank reconciliation is to identify any discrepancies between the two figures and rectify them if appropriate. Bank reconciliation is an essential tool in detecting and preventing fraud, identifying accounting errors, and ensuring that payments were processed and cash collections were deposited into the bank. The bank reconciliation process involves comparing and matching the financial records of a business with the bank statements to ensure they are consistent and accurate. Bank reconciliation statements are prepared by the entity as part of the reconciliation process, which sets out the entries that have caused the difference between the two balances. The necessary adjustments should then be made in the cash book, or reported to the bank if necessary, or any timing differences recorded to assist with future reconciliations. Bank reconciliation is usually handled by an accounting department or a business owner and is an important tool in cash-flow management.