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Bank Reconciliation Statement Assignment Help

Every business organization prepares its ledger accounts. They prepare Cash Account which gives the details of the transactions done in the business. Every bank transaction done is entered into the books in cash account. At the same time the banks also issue a passbook on which they put the transactions realized. Thus, at times the balance as per the pass book of the bank and as per the cash account in the books of the firm may not match. This originates the need of a statement which can find the differences between both of them.

In short, a Bank Reconciliation Statement means the statement that finds the differences between the balance as per cash account and the pass book and match them accordingly.

Bank Reconciliation Statement

Any of the approaches could be followed to bring the balances all together at the same point. This helps in finding if there is any error in the recording of the transactions. The accounts are matched thoroughly and any discrepancies between the bank and organization are resolved.

The Statement can be prepared by two approaches:

  1. Taking Balance as per the Pass Book as a basis.
  2. Taking Balance as per the Cash Book as a basis.
Bank Reconciliation Process

Causes of difference between the balances of Cash Book and Pass Book:

  1. Cheques issued but not yet presented for payment: The organization might have issued cheque as a payment but the receiver did not present the cheque in bank. In such a case Pass Book will show a higher amount than the Pass Book.
  2. Cheques deposited but net yet collected: The organization might have sent the cheques to the bank for collection but they did not collect. In such a case the Cash Book will show a higher amount than the Pass Book.
  3. Bank charges debited by bank: The Bank deducts its charges directly from the accountholder’s account. In such a case the Cash Book will show a higher balance than the Pass Book.
  4. Bank interest credited by bank: The Bank interest is debited by the bank directly into the account. Thus Pass Book will show a higher balance than the Cash Book.
  5. Dishonor of cheques: The cheques might get bounced in case of unavailability of balance in the bank account. In such a case the Cash Account will have to reverse the entry.
  6. Payment by bank on standing instructions of the concern: Sometimes the bank is instructed to make a timely payment on behalf of the holder. The account holder may not keep a track of the payment and the difference arises.
  7. Amount received by the bank on standing instructions of the concern: The holder my instruct the bank to collect his income from different sources timely and the holder might fail to keep a record, in such a case the Pass Book will show a higher balance than the Cash Book.

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Method to prepare Bank Reconciliation Statement using Balance as per Cash Book as basis:

Balance as per Cash Book

Method to prepare Band Reconciliation Statement using Balance as per Pass Book:

Balance as per Pass Book

Advantages of Bank Reconciliation Statement:

  1. Prevent Thefts: The Bank Reconciliation Statement helps in preventing theft. The Cash account and pass book must match at last. If it does not, it is quite evident that there has been some theft.
  2. Prevent Mistakes: The Bank Reconciliation Statement helps in the scrutiny of both pass book and cash book. It makes it easy to find the mistakes if any committed and thus it can be corrected.
  3. Account in good standing: As the cash book is matched with the pass book, it shows a real picture of the accounts of the firm. Thus it shows the authentic information.

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