What is the main purpose of a 'bank reconciliation'?

The main purpose of a bank reconciliation is to compare a company's bank statement with its cash records. This process is essential for identifying any discrepancies between what the business has recorded in its accounting books and what the bank shows in its statements. Discrepancies can arise due to various reasons, such as outstanding checks that haven't cleared yet, deposits in transit, or bank errors. By performing a bank reconciliation, businesses can ensure that their cash records are accurate and up-to-date, which helps maintain financial integrity and provides a clearer picture of the business’s financial position.

In contrast, monitoring the growth of a business focuses on tracking performance metrics over time, rather than addressing discrepancies in cash records. Ensuring compliance with accounting standards pertains to adherence to regulations and frameworks guiding financial reporting, which is broader in scope and not directly related to the bank reconciliation process. Calculating total revenue for a financial period is a separate task that involves summarizing income generated, rather than checking the accuracy of cash records against bank statements. Thus, the focus of a bank reconciliation aligns specifically with ensuring that the financial records match the bank's reported figures.