What is Bank Reconciliation Statement?
There are occasions when the company’s cash balance at bank does not match with cash balance in the accounting records. The reasons could be dishonor of checks, deposits may be in-transit or some errors may occur at the timing of recording the transaction. So, in order to identify the difference between the cash balance in company’s cash account and company’s bank account, companies prepare Bank reconciliation statement.
Transactions which appears in company’s cash account and not in bank statement-
Deposits in Transit – These are the cash deposits which are sent by the company to the bank but did not recognized by the bank before the issuance of bank statement.
Outstanding Cheque – Cheques which are issued by the company, but not presented or cleared in the bank before the issuance of the bank statement.
Transactions which appear in Bank Statement but not in Cash book
Service charges – It refers to the fees deduction made by the bank for its banking services. Companies are unaware of such charges till the issuance of the bank statement.
Interest Income – Interest earned by the company on the deposits it has with the banks. Companies do not have any knowledge about it till banks does not issue the bank statements.
Bounced Cheques – Company has deposited the cheque in the bank but the cheque gets bounced because in payee’s account there is no sufficient funds.
Bank Reconciliation Statement Example
Company XYZ bank statement shows a balance of 24,000 on Dec 31, 2011. The cash balance of the company is 23,000.
Additional information –
- On Nov 29, company issue a cheque of Rs 500
- Deposit of Rs 400 does not appear on Bank Statement.
- Cheque of Rs. 1000 return by bank due to insufficient cash in payee’s account.
- Services charges are Rs. 50
- Interest earned by the company is Rs. 3,200.
- In company’s cash record, deposit of Rs. 430 incorrectly entered as Rs. 340.
Prepare Bank Reconciliation Statement with the help of above information –
Bank Reconciliation
as on 31 December 2011
Balance as per Passbook ……………………………………………………24,000
Add: Deposit in Transit …………………………………………………….. 400
Less: Cheques outstanding ……………………………………………….. 500
Adjusted Bank Balance …………………………………………………….. 23,900
Balance as per Books…………………………………………………………23,000
Add: Interest Income from bank…………………………………………. 3,200
Add: Deposit wrongly written……………………………………………… 90
Less: Cheque dishonored……………………………………………………1,000
Less: Bank service charge…………………………………………………… 50
Adjusted Book Balance ……………………………………………………… 25,240
