BUSINESS ACCOUNTING
BY NADYA NARSIDANI
Bank Reconciliation Statement
MEANING OF A BANK RECONCILIATION STATEMENT
A statement showing the
• Reasons or
• Causes of differences between cash
book and pass book
• At a particular date
is known as a Bank Reconciliation
Statement.
Bank reconciliation statements
The Bank
Statement
• It is the account •This is then prepared
prepared by Bank to reconcile (or fix)
holders own
•It is the banks record the two records and
record of money of money received check for any errors
received and and spent by the that have occurred
spent account holder. This
is viewed from the
The Bank banks perspective The Bank
Account in cash Reconciliation
Book of a Statement
Company
CAUSES OF DIFFERENCE BETWEEN CASH BOOK AND PASS BOOK
BALANCE
Difference Due to Timing Transactions Recorded by Bank
There are some transactions recorded by Similarly, there are transactions appearing on the
the depositor but missed by the bank. bank statement and not recorded by the
oUnpresented cheques company.
They are cheques issued by the firm that
o Service charges
have not yet been presented to its bank
o They are charges made by the bank to the
for payment. company for banking services used.
Deposit transit/uncredited cheques o Dishonored cheques
Cash receipts recorded by the depositor o They are cheques deposited but subsequently
but not included in bank statement. returned by the bank due to the failure of the
drawer to pay.
o Interest allowed by the bank
o They are interest received for deposits or fixed
deposits.
o Miscellaneous bank charges and credits
o banks charge for services – such as printing
cheques, handling collection of notes
receivable and processing NSF cheques.
METHODS OF PREPARING A BANK RECONCILIATION
STATEMENT
Bank Reconciliation
Start With Cash Start With Pass
Book Book
Favorable or Unfavorable or
Debit Balance Credit Balance
Favorable or Unfavorable or
Credit Balance Debit Balance
PREPARATION OF A BANK RECONCILIATION
STATEMENT
Favourable (Debit) Balance as per Cash Book Added to Cash
Book Balance
Cheques issued but not presented for payment
Cheque deposited by a debtor directly into the bank
Interest allowed by the bank
Dividend collected
Bills of exchange realised Or Cash directly deposited into the bank but not recorded
in the Cash Book
Wrong credit granted by the bank
Cheque deposited but not recorded
Favourable (Debit) Balance as per Cash Book Deducted from Cash Book
Balance
Cheque deposited but not collected(Credited) by bank
Cheque or Bill of Exchange dishonoured(Credited) by bank
Bank charges charged
Interest charged
Direct payment by the bank as per standing order, e.g., life insurance premium paid
Wrong debit by the bank
Cheques recorded but not deposited
Illustration 1: Prepare a Bank Reconciliation statement from the following
particulars as on 31st March 2013.
1)Debit balance as per cash book 3,70,000
2) Cheque issued to creditors, but not yet presented to the bank
for payment 74,000
3) Bank charges 200
4)Dividend received by the bank, but not entered in cash book 5,000
5) Cheques deposited into bank for collection, but not collected
by bank upto this date 13,400
6) Interest given by the bank 1,250
7) A cheque deposited into bank was dishonoured, but no
intimation received 1,320
8) Bank paid house tax on our behalf, but no information received
from the bank in this connection 1,350
Illustration 2
Illustration 3
Illustration 4
