Final answer:
A bank reconciliation reconciles the bank statement with the company's book balance by identifying and adjusting any discrepancies between the two balances.
Step-by-step explanation:
A bank reconciliation reconciles the bank statement with the company's book balance. The book balance represents the actual amount of money recorded in the company's accounting records, while the bank statement shows the transactions and balances according to the bank.
During a bank reconciliation, any discrepancies between the two balances are identified and adjusted. This helps ensure the accuracy of the company's financial records and detects any errors or fraudulent activity.
For example, if the company's book balance shows $10,000, but the bank statement shows $9,500, the reconciliation process will involve identifying the reasons for the $500 difference and making the necessary adjustments.