What is the primary purpose of the bank reconciliation process?

The primary purpose of the bank reconciliation process is to ensure that the records of cash balances maintained by a company align with the records held by the bank. This process involves comparing the company's cash account as reflected in its books with the bank's records to identify and explain any discrepancies. Discrepancies might arise due to outstanding checks, deposits in transit, bank fees, or errors made by either party. By conducting regular bank reconciliations, a company can maintain accurate and reliable financial records, which is crucial for effective cash management, fraud prevention, and overall financial reporting. This practice ultimately supports the integrity of the company's financial statements and assists management in decision-making regarding cash flow.