Definition:- A bank reconciliation
statement is a document that matches the cash balance on a company’s balance sheet to the
corresponding amount on its bank statement. Reconciling the two accounts helps
determine if accounting changes are needed. Bank reconciliations are completed
at regular intervals to ensure that the company’s cash records are correct.
Rules in Preparation of Bank Reconciliation
1: Compare the opening balances of both the bank
column of the cash book as well as the bank statement. The two can be different
in terms of un-cleared dues like un-presented or un-credited cheques from
the previous month.
2: Start by comparing the credit side of the bank
statement to the debit side of the bank statement. Also, compare the credit
side of the cash book to the debit side of the cash book. The two must be equal
in both documents. Tick the columns if you can’t find any error.
3: Analyze entries in the bank column of the cash
book as well as in checkbook. Look for records that have been missed to be
posted in the bank column of the cash book. Make a separate list of all such
items and list them in cash book.
4: Correct the errors present in
the cash book, if any.
5: Calculate the balance after revising the updated cash
book’s bank column.
6: Prepare Bank Reconciliation Statement accordingly. Make
sure to add the updated version of records.
7: Banks are not aware of Un-presented cheques because the
beneficiary doesn’t get the cheque. It is the case when the business firm
forgets to deliver the signed cheque to the issued name.
This situation leads to the addition of the cheque amount in the
the other hand, cheques which beneficiary has not yet collected are called
un-credited cheques. These must be deducted.
8: Make all the final adjustments and check for bank errors
in the bank statement and the firm’s errors in the cash book. During heavy
transaction days, firms or banks may make mistakes in noting entries.
process removes those errors. Although it consists of fine work, reconciliation
becomes a helping hand at hard times (large transaction days).
9: The results from both the documents i.e. bank statement
and cash book must match with each other.