How to prepare a bank reconciliation statement?
Bank reconciliation statement is prepared to find out the reasons for difference in Bank balance as per Cash Book and Balance as per Pass Book.
Firstly you need to analyze the reasons for difference in balance of these two books. Then proceed with the balance as per any one book given to you and add or subtract the amounts earlier considered because of which the difference has raised. The end balance will be the balance as per the other book.
The simple format of BRS is as below:
Bank Reconciliation Statement
Balance as per the Cash Book
Cheques issued but not presented
Interest credited by bank
Cheque deposited but not credited by bank
Bank charges not recorded in cash book
Balance as per pass book
To Prepare a Bank Reconciliation Statement
(a) Compare transactions that appear on both Cash Book and Bank Statement
(b) Update Cash Book from details of transactions appearing on Bank Statement
(c) Balance the bank columns of the Cash Book to calculate the revised balance
Complete a Bank Reconciliation Statement
(a) Enter correct date of the statement
(b) Enter the balance at bank as per the Cash Book
(c) Enter details of unpresented cheques
(d) Enter sub-total on reconciliation statement
(e) Enter details of bank lodgements
(f) Calculate balance as per Bank Statement
THE NEED FOR AN ACCURATE CASH BOOK
Most organisations keep a record of their cash and bank transactions in a
cash book (see Chapter 13). The cash book contains a record of both the cash
account and the bank account and shows the balance in each account at the
end of a period. Once the cash book has been balanced off it is usual to check
the details with the records of the firm’s bank transactions as recorded by the
To enable this check to be made the cashier will need to ensure that the cash
book is completely up-to-date and a recent bank statement has been obtained
from the bank.
Often,when a comparison is made between the bank balance as shown in the
firm’s cash book with that shown on the bank statement, the two balances
will be different. It is for this reason that a bank reconciliation statement
is prepared to reconcile (‘tally up’) the two balances. The reconciliation may
identify errors that may have been made in either the firm’s cash book or in
the bank’s records. Any corrections can then be made.
An example of a bank reconciliation statement is shown below. As you can
see, it is a very simple calculation. The process of drawing up a bank
reconciliation statement will be explained in full on pages xx-xx.