BANK RECONCILIATION STATEMENT

Generally Bank gives a small books to its customer in which the transactions made by us(customer) with bank are recorded. This small book is known as Bank Pass Book. It contains a copy of the customer account at bank. The balance shown by the bank passbook should agree with the bank balance shown by cashbook. However, often there is a difference even if there is no mistake. The difference is due to following reasons:

i.Cheques received entered in the cash book as soon as they are received, however the same has not deposited in to                                                                                     bank.

ii. The received cheque has been deposited into bank but the cheque has not been realised and the bank has not given credit to the customer. In this case, cash book will show more balance than what the bank shows in the customer’s account.

iii.When the Cheques are issued to the other, the entry for issuing a Cheque is recorded in cash book but the person who received a cheque did not present the cheque into bank for payment, this means that the bank shows a higher balance in favour of the client than what the cashbook of the client shows.

iv. The bank often makes some bank charges for services it renders. If there is an overdraft, the bank will also charge interest. These bank charges and interest are recorded in the passbook and the entry is generally made in cashbook only when the passbook is received.

v.Sometimes the bank is entrusted with the task of collecting interest on securities or dividends on shares or even the collection of amounts due on bills of exchange or promissory notes. The bank will credit the customer as soon as the amounts are received but the entry by the customers in the cashbook must await receipt of information by the customer from the bank.

vi.The bank may also make payments according to the standing instruction of the client or in respect of any special instruction such as presentation of documents for supply of goods for which a letter of credit has been opened previously. Entries in the cashbook in such cases are made on receipt of advise from bank.

To know the reason or differences between balances shown by the bank pass book and that shown by the in cashbook on a particular date and to be sure, that no mistakes have been committed there must be statement. The statement is known as the bank reconciliation statement. It helps management to check the accuracy of the entries made in the cashbook and keep track of checks, e.t.c. which may have been sent to bank for collection. The bank reconciliation statement can be prepared starting from the bank passbook balances as well as cashbook balances.

[1] RECONCILIATION STATEMENT STARTING FROM THE PASSBOOK BALANCE

|2|. RECONCILIATION STATEMENT STARTING FROM CASH BOOK BALANCE.

➢ Bank reconciliation Statement in case of overdraft:-- Preparation of the Bank Reconciliation Statement

Take the cash book or the pass book balance and then see what has been done or not been done in the other book. Thus if we start from the pass book balance, we must see what has been or not been done in the cash book. Then work out the balance as if the entries passed in the cash book had also been passed in the pass book and the entries not passed in the cash book had also been removed from the pass book. If we start from the cash book, we should follow the pass book entries.

 #BANKRECONCILIATIONSTATEMENT