Summary - bank reconciliation statement accountancy
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Course
Accountancy
Institution
A bank reconciliation system is a crucial financial process used by individuals and businesses to ensure that their bank records and their internal accounting records match. This reconciliation helps identify discrepancies, errors, or unauthorized transactions, ensuring the accuracy of financial in...
Revision Notes
Chapter-4 Bank Reconciliation Statement
Preparation of bank Reconciliation Statement, Ledger and Trial Balance
Learning Objectives
After studying this chapter, students should be able to understand:
1. Meaning of Bank Reconciliation statement.
2. Causes of Differences in Bank Balance as per Cash Book and Pass Book.
3. Importance of Bank Reconciliation Statement.
4. Procedure of preparation of bank Reconciliation statement
5. Preparation of Adjusted Cash Book.
Bank Reconciliation Statement
Definition: A schedule showing the items of difference between the bank statement and the
bank column of Cash Book is known as Bank Reconciliation Statement. "A bank
reconciliation is the process of matching the balances in an entity's accounting records for a
cash account to the corresponding information on a bank statement. The goal of this
process is to ascertain the differences between the two, and to book changes to the
accounting records as appropriate".
Causes of Differences in Cash Book and pass Book
A. Transactions recorded in Cash Book but not in Pass Book.
B. Transactions recorded in Pass Book but not in Cash Book.
C. Others transaction errors.
A. Transactions recorded in Cash Book but not in Pass Book
i. Cheques issued but not presented for payment in the bank.
ii. Cheqes deposited or paid into the bank for collection but not yet credited by bank.
iii. Cheqes deposited but dishonored.
iv. Working Debit or credit entered.
B. Transactions recorded in Pass Book but not in Cash Book :-
, i. Interest allowed by the Bank
ii. Interest on overdraft, bank charges and commission etc. charges by Bank.
iii. Direct deposit by the customers into Bank.
iv. Interest, dividednd etc. collected by the Bank.
v. Direct payment made by the Bank on behalf of customer as per standing instruction.
C. Other transactions :-
i. Error in totaling or balancing of Cash Book.
ii. Transactions recorded twice in Cash Book.
iii. Transactions recorded twice in Pass Book.
iv. Error of recording by wrong amount.
v. Error of recording in wrong side like Debit instead of credit and vice-versa.
Need and importance
It helps in locating and rectifying the errors or omissions committed either by the
firm or by the bank.
Customer becomes sure of the correctness of the bank balance shown by the cash
book.
Facilitates the preparation of amended or revised Cash Book.
Reduces the chances of fraud by the staff of the firm or bank.
Helps in keeping a track of the cheques deposited for collection.
Procedure of preparing Bank Reconciliation Statement (BRS)
A Bank Reconciliation Statement is prepared when we get the duly completed Pass Book
from the Bank.
1. First of all tally the Debit side entries of the cash book with the Credit side entries of the
Pass Book and vice versa.
2. Tick the items appearing in both the books.
3. Unticked items will be the points of differences.
4. A BRS is then prepared by taking either the balance as per Cash Book or Pass Book as a
starting point.
Important points
1. If the Starting point is Cash Book Balance then the ending point will be Pass Book
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