The cash book of a company is the record of exactly how much cash the business considers that it has in the bank. In exactly the same way, you yourself could keep a private history of just how much money you believe you have in the own personal account of yours at your bank, possibly by producing a note inside your cheque book of income received and the cheques you write.
If you keep such a record you’ll most likely agree that when your bank account directs you a bank statement from time to time the amount it shows as being the balance in your account is rarely really the amount that you have calculated on your own as being your present balance.
Why might your own estimation of your savings account balance be completely different out of the amount shown on your bank statement?
You will find three common explanations.
Error in calculation, or even recording payments and income, are more likely to have most certainly been made by you than by the bank account, but it’s conceivable that the bank has developed an error in judgment too.
2. Bank charges or bank interest.
The bank may deduct charges for attention on an overdraft or for the service of its, which you’re not educated about until you get the bank statement.
There could be some cheques that you’ve received and paid into the bank, but which haven’t yet been “cleared” and added to your account.
In the same way, you might have produced several payments by cheque, and also reduced the balance in your account appropriately in the record that you simply keep, but the person that gets the cheque may not bank at some time.
if you do keep your own record of the cash position of yours at the bank, and if you do check your periodic bank statements against everything you think you must have in the account of yours, you are doing exactly the same that the bookkeepers of a company do if they generate a bank reconciliation.