Bank Reconciliation Statement

Bank Reconciliation Statement is prepared to match the differences in the two balances: Bank balance as per Cash Book and Bank balance as per Pass Book/Bank Statement on a particular date. It is a statement that lists out the reasons of such differences between the two books and also facilitate to reconcile these differences.

Need of Bank Reconciliation Statement

BRS is required as a result of the following factors.

  • It helps in figuring out those mistakes which lead to a mismatch in the balance of the Cash Book or Pass Book.
  • The reasons which caused the above mentioned mistakes are also revealed while preparation of Bank Reconciliation Statement.
  • It reflects accuracy of transactions entered in the cash book and also maintains list of uncleared cheques.
  • It shows true bank balance and also reduces chances of small frauds committed by employees.

Steps to Prepare Bank Reconciliation Statement

  • Firstly, we try and identify which balance (Cash Book or Bank Pass Book) is given in the question. This balance would be taken as the starting point of the Statement.
  • This Starting Balance is written in the Bank Reconciliation Statement.
  • Check each transaction and identify whether they should be added or deducted to/ from the Starting Balance. If any transaction increases the other Book Balance then it should be shown as addition to Starting Balance under Plus Items. On the other hand, if any transaction decreases the other Book Balance then it should be shown as deduction to Starting Balance under the minus items.
  • After taking into account all the transactions we shall calculate the final balance. This final balance represents Balance of Other Book.

Also, Read

Accounting Information

accounting information is often defined as data and facts produced or revealed by the financial statements of a business. This information is usually available within the sort of financial statements, financial reports, etc.

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