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Simple English definitions for legal terms
reconciliation statement
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A quick definition of reconciliation statement:
A reconciliation statement is a type of financial statement that helps to fix mistakes or differences in numbers. It's like double-checking your math to make sure everything adds up correctly. This statement is important because it helps to ensure that all the numbers are accurate and that there are no errors in the financial records.
A more thorough explanation:
A reconciliation statement is a financial statement that is used to adjust discrepancies in accounting or financial records. It is a tool used to ensure that the records of an organization are accurate and complete.
Let's say that a company's bank statement shows a balance of $10,000, but the company's accounting records show a balance of $9,500. In this case, a reconciliation statement would be used to identify and adjust the discrepancies between the two records. The statement might show that there was an outstanding check for $500 that had not yet cleared the bank, which would explain the difference in the balances.
Another example could be a credit card statement that shows a balance of $1,000, but the company's records show a balance of $900. A reconciliation statement would be used to identify and adjust any discrepancies between the two records, such as a transaction that was not properly recorded in the company's accounting system.
These examples illustrate how a reconciliation statement is used to ensure that financial records are accurate and complete by identifying and adjusting any discrepancies that may exist.