BANK RECONCILIATION STATEMENT

1.Meaning:  Bank Reconciliation Statement is a Statement Prepared on a Particular Day to Reconcile the Bank Balance as per Cash Book with the Balance as per Bank Pass Book or Bank Statement showing entries causing difference between the two Balances.

2.Need and Importance of Bank Reconciliation Statement

1.It brings to light errors that may have been committed either in the cash book or in the bank statement or pass book.
2.Undue delay in the clearance of cheques deposited is known from the Reconciliation.
3.Regular Reconciliation discourages embezzlements.
4.Reconciliation helps the management to verify the accuracy of entries recorded in the cash Book.
5.It shows actual bank balance.

3.Reasons of Difference between balances as per cash Book and Bank Statement or Bank Pass Book

1.Difference Due to Timings
(a)Cheques Issued But not yet Presented for Payment
(b)Cheques Deposited into Bank but not yet Cleared

2.Transactions Recorded by Bank

(a)Interest credited by Bank but not Recorded in the cash book
(b)Bank Charges and Interest charged by Bank but not recorded in the cash book
(c)Interest and Dividends Collected by the Bank
(d)Direct Payments by the Bank
(e)Direct Deposit into Bank by a customer
(f)Dishonour of a Bill Discounted with the Bank
(g)Bills Collected by the Bank on Behalf of the Customers

3.Errors
(a)Errors and Omissions : errors and Omissions Either in the cash Book or In the Bank Statemnet or Bank Pass Book is Another reason for difference between the balances as per cash book and bank statement or Pass book.

Method of Bank Reconciliation Statement