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Bank reconciliation statements:

The cashbook of the firm will show the cash payments and receipts that arise out of transactions. It will also show money being paid into and out of the firm's bank account. On a fairly frequent basis, the firm will actually receive a copy of a bank statement which is produced by the bank in which the firm holds an account with. This will detail the money paid into and out of our bank account. In theory, the bank column of the cashbook and the banks statement from the bank itself should be identical; they are, after all, the same account. However, in reality the two are unlikely to give us the same data, and the banks statement and the cashbook may well give us different figures for the balances.

Possible reasons for any differences in balance:

1. Error - by us or by the bank. 2. Items in the cashbook but no on the bank statement. 3. Items on the bank statement but not in the cashbook.

Procedure for bank reconciliation:

The term reconciliation simply means to bring together and this can be done in the following manner. 1. We need to eliminate items that appear in both the cashbook and on the bank statement, as these will not be the reason for the discrepancy. 2. The cashbook will need to be brought up to date by entering items found only on the banks statement and not in the cashbook. 3. Draw up a reconciliation statement using the updated cashbook balance and items appearing in the cashbook that were not on the bank statement.

Rules of preparing BRS:

Information Cash book shows debit Cash book shows balance i.e., bank credit balance i.e., statement shows bank statement credit balance shows debit balance CB to BS BS to CB CB to BS BS to CB Add Less Add less Less Add Less Add Less Add Less Add Add Less Add Less

Cheques issued but not presented in the bank Cheques paid into bank but not collected and credited by the bank Credit, if any in the bank statement Debit, if any in the bank statement

Ayaz Mustafa

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