basics of bank reconcilation statement .ppt

Bank Reconciliation Statement

1. Bank Reconciliation
Statement

2. Meaning
•This is a statement prepared so as to
agree the bank balance as shown by the
pass book with Bank balance as shown
by the bank column of cash book.
•This statement explaining the causes of
disagreement between the balances of
cash book and pass book.

3. Need of BRS
•It helps to understand actual balance
position.
•It helps in detecting mistakes
•It helps to prevent fraud.
•It explain any delay in collection of
cheques.

4. Reasons of Disagreement
•Cheques issued but not presented for
payment.
•Cheques deposited in the bank but not
collected.
•Cheques received and entered in the
cash book, but not deposited into bank
for collection.
•Cheques deposited into bank for
collection but not recorded in cash book.

5. Reasons of Disagreement
•Direct payment in to customers bank
account by other parties but not
recorded in the cash book.
•Interest allowed and credited by the
bank.
•Collection of dividend by the bank.
•Interest charged or bank charges or
commission debited in the pass book.

6. Reasons of Disagreement
•Standing instructions
•Dishonour of cheques.
•Errors.

7. Common rules to solve BRS problems
•If you record payment either less or not
recorded.
–Impact on closing balance : Closing balance
will increase as payments are less that
means amount to be deducted is less.
–Treatment: Find the difference and deduct
from the closing balance.

8. Common rules to solve BRS problems
•If you record payment either excess or
recorded only in one book.
–Impact on closing balance : Closing balance
will decrease as payments are more that
means amount to be deducted is more.
–Treatment: Find the difference and add to
the closing balance.

9. Common rules to solve BRS problems
•If you record receipts either less or not
recorded.
–Impact on closing balance : Closing balance
will decrease as receipts are less that means
amount to be added is less.
–Treatment: Find the difference and add to
the closing balance.

10. Common rules to solve BRS problems
•If you record receipts either excess or
recorded only in one book.
–Impact on closing balance : Closing balance
will increase as receipts are more that
means amount to be added is more.
–Treatment: Find the difference and deduct
from the closing balance.

11. Example1: Cheque of Rs.500 issued on 25
th

March, but presented for payment on 5
th

April.
Cash Book
Receipt Payment
10000 500
Balance 9500
10000 10000
Pass Book
Payment Receipt
0 10000
Balance 10000
10000 10000
If you are preparing BRS
from cash book then the
balance needs to be
corrected. So we will add
Rs.500 into closing balance
of CB to equal it with PB
Balance 9,500
(+) Cheque Not
presented 500
Balance as per PB 10,000

If you are preparing BRS
from pass book then the
balance needs to be
corrected. So we will less
Rs.500 from closing
balance of PB to equal it
with CB
Balance 10,000
(-) Cheque Not
presented 500
Balance as per CB 9,500

12. Example 2: A cheque of Rs.600 received on
27
th
March but collected on 1
st
April.

Cash Book
Receipt Payment
10000
600 Balance 10600
10600 10600
Pass Book
Payment Receipt
0 10000
Balance 10000
10000 10000
If you are preparing BRS
from cash book then the
balance needs to be
corrected. So we will less
Rs.600 into closing balance
of CB to equal it with PB
Balance 10,600
() Cheque not
Incashed 600
Balance as per PB 10,000