The bank balances as shown in the cash book and the bank statement seldom agree.

There are various reasons for this. A statement is used to reconcile the two balances.

A reconciliation statement is prepared at periodical intervals with a view to indicate the items which cause such disagreement between the balance as shown by the bank column of the cash book and the bank pass book on any given date.

 BRS is used to explain the reasons for the differences and to identify errors and omissions in both documents, so that corrections can be made as soon as possible. Due to the timing difference ,omissions and errors made by the bank or the firm itself, the balances of the bank statement and the bank account in the cash book rarely agree.

 Bank reconciliation statements can be used to explain the reasons for the differences and to identify errors and omissions in both documents, so that corrections can be made as soon as possible.

Uncredited items
They are deposits paid into the bank .These items occurred too close to the cut-off date of the bank statement and so do not appear on the statement. They will appear on the next statement.

 Unpresented cheques They are cheques issued by the firm that have not yet been presented to its bank for payment.

Standing orders
They are standing instructions from the firm to the bank to make regular payments.

 Direct debits
They are payments made directly through the bank.

Bank charges
They are charges made by the bank to the company for banking services used.

Interest allowed by the bank

They are interest received for deposits or fixed deposits.

 Dishonored cheques
They are cheques deposited but subsequently returned by the bank due to the failure of the drawer to pay.

Credit transfers/ Direct credits

They are collections from customers directly through the bank.

Check the bank statement and the cash book to see the items which have been omitted.

Update the cash book with any omissions and errors made by the itself.

Prepare the bank reconciliation statement.

Particulars Bal. as p r as Book A : XX XX XX XXX XX XX XX XXX XXX

D posit S own in Pass Book Pay L ss : D posits not s own in Pass Book Pay nts s own only in Pass Book nts s own in as Book

Bal. as p r Pass Book

Question :
Balanc qu qu Bank Balanc as p r as Book Rs.5800 s issu ut not pr s nt for pay nt Rs.2000 s s nt for coll ction ut not coll ct Rs.1500 it A/c y Rs.200 on account of int r st c arg s. as p r Pass Book is Rs.6100

Answer :
Particulars Balanc as p r as Book Add : qu issu pay nt. ut not pr s nt for 2000 2000 7800 Less : qu s nt for coll ction ut not coll ct Bank c arg s not r cor in cas ook. . 1500 200 (1700) 5800

Balanc as p r Pass Book

6100

 The errors that ight have een committed either in the cash ook or pass ook are revealed.

 The reconciliation statement will also indicate any undue delay in the clearance of outstation cheques.

 A reconciliation statement prepared at regular intervals will discourage the staff of either or the ank from committing the acts of embezzlement. It is possible that the cashier might have made the entry in the cash book but might not have deposited the amount in the bank.