Bank Reconciliation Statement

BANK RECONCILIATION STATEMENT:
                                    A Bank reconciliation is a process that explains the difference between the bank balance shown in an organisation's Bank statement, as supplied by the bank, and the corresponding amount shown in the organisation's accounting records at a particular point in time. 

RECORDING:

                                            A transaction relating to bank has to be recorded in both the books i.e.  Cash Book and Pass Book but sometimes it happens that a  bank transaction is recorded only in one book and not recorded simultaneously in other book causing difference in the two balances.

EXAMPLE:

                   We operate a bank account in which we deposit money and withdraw money from time to time. We maintain a record with ourselves of these deposits and withdrawals. One day we get our pass-book (statement issued by the bank) updated but are surprised to find that the balance shown by the pass book was different from what it should have been as per our records.

                                                                              Then it is obvious that we will compare the two sets of records and find out items which are recorded in one but not in the other. Similar situation may arise in case of a business concern which operates a bank account. These business concerns maintain record of all of their banking transactions in their bank column of the cash book.

DIFFERENCES BETWEEN BANK STATEMENT AND 

CASH BOOK BALANCES:

                                                                        On any particular date the bank balance shown by the bank column cash book and that shown by the pass book should be the same. But if there is difference between the two, the business concern will find out the reasons to reconcile the balance.

Following Points are considered;

• Compare transactions that appear on both Cash Book and Bank Statement
• Update Cash Book from details of transactions appearing on Bank Statement
• Balance the bank columns of the Cash Book to calculate the revised balance
• Enter correct date of the statement
• Enter the balance at bank as per the Cash Book
• Enter details of unpresented cheques
• Enter sub-total on reconciliation statement
• Enter details of bank lodgements
• Calculate balance as per Bank Statement