Bank Reconciliation Statement is a document that reconciles the balance of a bank account as shown on the bank statement with the balance of the same account as shown in the company’s records.
Here are the steps on how to prepare a Bank Reconciliation Statement when extracts of Cash Book and Pass Book are given:
- Gather the necessary information. This includes the bank statement, the company’s records, and any other relevant documentation.
- Prepare a blank reconciliation statement. The reconciliation statement should have two columns: one for the bank statement balance and one for the company’s records balance.
- Compare the transactions on the bank statement with the transactions in the company’s records. This can be done by comparing the dates, amounts, and descriptions of the transactions.
- Identify and explain any differences. If there are any differences between the two sets of records, the reasons for the differences must be identified and explained.
- Make any necessary adjustments to the company’s records. If there are any errors or discrepancies in the company’s records, they must be corrected.
- Reconcile the two balances. This is done by adding or subtracting the necessary amounts from the two balances to bring them into agreement.
- Prepare the final reconciliation statement. The final reconciliation statement should show the reconciled balance, which is the balance on the bank statement after all adjustments have been made.
Here are some tips for preparing a Bank Reconciliation Statement:
- Be organized. Keep all of your financial records in one place, and make sure that they are up-to-date.
- Be thorough. Compare all of the transactions on the bank statement with the transactions in your records.
- Be accurate. Make sure that all of your adjustments are correct.
- Be clear. The reconciliation statement should be easy to understand.
By following these tips, you can ensure that your reconciliation statement is accurate and that your bank account records are up-to-date.
Here are some examples of items that may be included in a Bank Reconciliation Statement:
- Deposits: Deposits that have been made to the bank account but not yet reflected on the bank statement.
- Withdrawals: Withdrawals that have been made from the bank account but not yet presented to the bank for payment.
- Charges: Bank charges that have been incurred but not yet reflected on the bank statement.
- Interest: Interest that has been earned on the bank account but not yet reflected on the bank statement.
- Errors: Errors that have been made by the bank or by the company in recording transactions.
By understanding the process of preparing a Bank Reconciliation Statement, you can ensure that your bank account records are accurate and that you have a clear understanding of your finances.