Bank Reconciliation Statement

 A bank gives to each of its customers after some interval

a copy of the customer’s account as it appears in the
bank’s own ledger. This copy is know as Bank
statement or Bank Pass Book.
 Exp –Bank normally charges some amount for different
expanses like cheque book charges, inoperative charges
etc. without intimating the customer. The customer
knows about such charged only after receiving the bank
statement .Till that date , cash book differs with the
statement or pass book . Since the two balances are
different ,if all the facts are brought together ,it is
possible for them to be reconciled by means of a bank
Reconciliation Statement.
 Objectives of bank Reconciliation
 The main objectives of preparation of bank
reconciliation statement are—
a. To determine that all payments made by the bank
are properly charged to the bank account.
b. To ascertain that all amounts deposited are
credited by the bank ;
c. To make certain that opening and closing balances
carried by the bank are correctly computed;
d. To verify periodically the accuracy of the firm’s
own computation of bank balances.
Importance of bank Reconciliation
Statement
a. It highlights the causes of difference
between bank balance as per cash book and
bank balance as per bank statement.
Necessary adjustments or corrections can
therefore be made at the earliest
b. It reduces the chances of fraud by the staff
handing cash.
c. There is a moral check on the staff to keep
the cash records always up-to-date.
 Causes of difference
 There are several reasons for disagreement between the two
balances, the most common being the following:
a. Cheques issued but not yet presented for payment;
b. Cheques deposited into bank but not yet cleared
c. Cheques received and entered in the bank column of the cash
book but omitted to be deposited into bank;
d. Interest on deposited credited in the bank statement but not
entered in the cash book;
e. Bank charges and interest on overdraft debited in the bank
statement but not yet recorded in the cash book;
f. Dishonored cheques debited in the bank statement but not yet
recorded in the cash book.
g. Amounts directly deposited into bank by debtors and not
entered in the cash book.
h. Payments by bank under standing order not recorded in the
cash book.
i. Incomes collected by bank under standing order not recorded in
cash book.
 Method of Reconciliation

Bank Reconciliation

Without adjusting cash book Adjusted cash book

 Without adjusting cash book
 From favorable cash book Balance
 Add :- Items which increase the pass book favourable balance
 Less:- Items which decrease the pass book favourable balance
Exp. From the following particulars, prepare a bank Reconciliation
Statement on 31st Mar. 2010.

Particulars Rs.
Bank balance as per cash book 21600
Cheques paid in but not credited 43600
Cheques drawn but not presented 13200
Bills payable met by the bank but not entered in cash 38400
book
Bank charged not entered in cash book 250
 Solution
bank Reconciliation Statement as on 31st Mar. 2010

Particulars Amount Amount

Bank balance as per cash book (favourable) 21600

Add:- Cheques paid in but not credited 13200

Less:- Cheques drawn but not presented 43600

Bills payable met by bank not 38400
entered in cash book

Bank charged not entered in cash book 250

Bank 82250