Definition : A
schedule showing the items of difference between the bank column of Cash Book
is known as Bank reconciliation statement.
Causes of Differences in Cash Book and Pass Book
(A) Transactions recorded in Cash Book but notin Pass Book.
(B) Transactions recorded in Pass Book but not in Cash Book.
(C) Others transactions errors.
(A) Transactions recorded in Cash Book but not in Pass Book
(i) Cheques issued but not presented for payment in the bank.
(ii) Cheques deposited or paid into the bank for collection but not yet credited by bank.
(iii) Cheques deposited but dishonored.
Causes of Differences in Cash Book and Pass Book
(A) Transactions recorded in Cash Book but notin Pass Book.
(B) Transactions recorded in Pass Book but not in Cash Book.
(C) Others transactions errors.
(A) Transactions recorded in Cash Book but not in Pass Book
(i) Cheques issued but not presented for payment in the bank.
(ii) Cheques deposited or paid into the bank for collection but not yet credited by bank.
(iii) Cheques deposited but dishonored.
(iv) Working Debit or credit entered
(B) Transactions recorded in Pass Book but not in Cash Book:-
(i) Interest allowed by the Bank
(ii) Interest on overdraft, bank charges and commission etc charges by Bank.
(iii) Direct deposit by the customers into Bank
(iv) Interest, dividend etc. collected by the Bank.
(V) Direct payment made by the Bank on behalf of costumer as per standing instruction.
(C) Other transactions:-
(i) Error in totaling or balancing of Cash Book.
(ii) Transactions recorded twice in Cash Book.
(iii) Transactions recorded twice in Pass Book
(iv) Error of recording by wrong amount.
(v) Error of recording in wrong side like Debit instead of credit and vice-versa.
Need and importance
> It helps in locating and rectifying the errors or omissions committed either by the firm or by the bank.
> Customer becomes sure of the correctness of the bank balance shown by the cash book.
> Facilitates the preparation of amended or revised Cash Book.
> Reduces the chances of fraud by the staff of the firm or bank.
> Helps in keeping a track of the cheques deposited for collection.
Procedure of Preparing Bank Reconciliation Statement
A Bank Reconciliation Statement is prepared when we get the duly completed Pass Book from the Bank
(1) First of all tally the Debit side entries of the cash book with the credit card entries of the passbook and vice versa.
(2) Tick the items appearing in both the books.
(3) Unticked items will be the points of differences.
(4) A BRS is then prepared by taking either the balance as per Cash Book or Pass Book as a starting point.
Important Points
(1) If the Starting point is Cash Book Balance then the ending point will be Pass Book Balance.
(2) If the starting point is Pass Book Balance then the ending point will be the Balance as per Cash Book.
(B) Transactions recorded in Pass Book but not in Cash Book:-
(i) Interest allowed by the Bank
(ii) Interest on overdraft, bank charges and commission etc charges by Bank.
(iii) Direct deposit by the customers into Bank
(iv) Interest, dividend etc. collected by the Bank.
(V) Direct payment made by the Bank on behalf of costumer as per standing instruction.
(C) Other transactions:-
(i) Error in totaling or balancing of Cash Book.
(ii) Transactions recorded twice in Cash Book.
(iii) Transactions recorded twice in Pass Book
(iv) Error of recording by wrong amount.
(v) Error of recording in wrong side like Debit instead of credit and vice-versa.
Need and importance
> It helps in locating and rectifying the errors or omissions committed either by the firm or by the bank.
> Customer becomes sure of the correctness of the bank balance shown by the cash book.
> Facilitates the preparation of amended or revised Cash Book.
> Reduces the chances of fraud by the staff of the firm or bank.
> Helps in keeping a track of the cheques deposited for collection.
Procedure of Preparing Bank Reconciliation Statement
A Bank Reconciliation Statement is prepared when we get the duly completed Pass Book from the Bank
(1) First of all tally the Debit side entries of the cash book with the credit card entries of the passbook and vice versa.
(2) Tick the items appearing in both the books.
(3) Unticked items will be the points of differences.
(4) A BRS is then prepared by taking either the balance as per Cash Book or Pass Book as a starting point.
Important Points
(1) If the Starting point is Cash Book Balance then the ending point will be Pass Book Balance.
(2) If the starting point is Pass Book Balance then the ending point will be the Balance as per Cash Book.
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