Project report

BBA(purple)
Submitted by:
Zain Ahmed(237)
Sammar Ahmad(172)
Submitted to:
Maam Sadia Aslam
 Bank reconciliation statement

Definition:
A bank reconciliation statement is a document that matches the cash balance on a
company’s balance sheet to the corresponding amount on its bank statement. Reconciling the
two accounts helps determine if accounting changes are needed. Bank reconciliations are
completed at regular intervals to ensure that the company’s cash records are correct. They also
help detect fraud and any cash manipulations.

How to prepare bank reconciliation statement:

 The first step is to compare opening balances of both the bank column of the cash book
as well as bank statement; these could be different due to un-credited or un-presented
cheques from a previous period.
 Now, compare credit side of the bank statement with debit side of the bank column of
cash book and debit side of the bank statement with the credit side of the bank column
of the cash book. Place a tick against all the items appearing in both the records.
 Analyze the entries both in the bank column of the cash book as well as pass book and
look for entries which have been missed to be posted in the bank column of the cash
book. Make a list of such entries and make the necessary adjustments in the cash book.
 Correct if any mistakes or errors appear in cash book.
 Calculate the corrected and revised balance of cash book’s bank column.
 Now, start bank reconciliation statement with updated cash book balance.
 Add the un-presented cheques (cheques which are issued by the business firm to its
creditors or suppliers but not presented for payment – Expense) and deduct un-credited
cheques (Cheques paid into the bank but not yet collected – Income).
 Make all the necessary adjustments for the bank errors. In case the bank reconciliation
statement begins with the debit balance as per bank column of the cash book, add all
the amounts erroneously credited by the bank and deduct all the amounts erroneously
credited by the bank. Do vice-versa in case its start with the credit balance.
 The resultant figure must be equal to the balance as per the bank statement.
Bank reconciliation procedure:
 On the bank statement, compare the company’s list of issued checks and deposits to the
checks shown on the statement to identify uncleared checks and deposits in transit.
 Using the cash balance shown on the bank statement, add back any deposits in transit.
 Deduct any outstanding checks.
 This will provide the adjusted bank cash balance.
 Next, use the company’s ending cash balance, add any interest earned and notes
receivable amount.
 Deduct any bank service fees, penalties, and NSF checks. This will arrive at the adjusted
company cash balance.
 After reconciliation, the adjusted bank balance should match with the company’s ending
adjusted cash balance.

Format:
Why we prepare bank reconciliation statement:
It‘s not compulsory to prepare a BRS and
there’s no fixed date for preparing BRS. BRS is prepared on a periodical basis for checking that
bank related transactions are recorded properly in cash book’s bank column and also by the
bank in their books. BRS helps to detect errors in recording transactions and determining the
exact bank balance as on a specified date.

Benefits of bank reconciliation statement:

Accounting errors could lead to circumstances which are more than just embarrassing when the
cheques bounce or companies start getting annoying calls from creditors or suppliers for
payments which are already released. Bank reconciliations assist you in spotting fraud and
reducing the risk of transactions which could cause penalties and late fees. BRS offers several
advantages to a business which includes:
Detecting errors: A bank reconciliation helps you in spotting accounting errors which are
common to every business. These mistakes include errors such as addition and subtraction,
missed payments and double payments.
Tracking Interest and Fee: Banks might add interest payments, fees or penalties on your
account. Monthly bank reconciliation allows you to add or subtract such amounts in your
books.
Detecting Fraud: You may not be able to prevent employees from stealing your money once,
however, you could prevent it in future. Bank reconciliations statement helps you in detecting
and spotting fraudulent transactions. It is advisable to employ an independent person to
perform the reconciliations for preventing the accounting employee from falsifying your books
and reconciliations.
Tracking Receivables: BRS allows you to confirm all your receipts, assisting you to avoid
awkward situations and also identifying entries for receipts which you didn’t deposit.
Example:
Bonzer sports is closing its books and must prepare a bank reconciliation for the following
items:

 Bank statement contains an ending balance of $300,000 on February 28, 2018, whereas
the company’s ledger shows an ending balance of $260,900
 Bank statement contains a $100 service charge for operating the account
 Bank statement contains interest income of $20
 XYZ issued checks of $50,000 that have not yet been cleared by the bank
 XYZ deposited $20,000 but this did not appear on the bank statement
 A check for the amount of $470 issued to the office supplier was misreported in the cash
payments journal as $370.
 A note receivable of $9,800 was collected by the bank.
 A check of $520 deposited by the company has been charged back as NSF.

Amount Adjustment to
Books
Ending Bank Balance $300,000
Deduct: Uncleared – $50,000 None
cheques
Add: Deposit in transit $20,000 None
Adjusted Bank Balance $270,000
Ending Book Balance $260,900
Deduct: Service charge – $100 Debit expense, credit
cash
Add: Interest income $20 Debit cash, credit
interest income
Deduct: Error on check – $100 Debit expense, credit
cash
Add: Note receivable $9,800 Debit cash, credit
notes receivable
Deduct: NSF check – $520 Debt accounts
receivable, credit
cash
Adjusted Book Balance $270,000