Bank

Reconciliation
Presentation by

Harkrishan Singh
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Definition of Bank Reconsilation Factors affecting them

Reasons for Difference Step to prepare BRS

Major Challenges Advantages of making Bus

 Definition of Bank
Reconciliation

A bank reconciliation statement is a document that

compares the cash balance on a company’s balance
sheet to the corresponding amount on its bank statement.
Reconciling the two accounts helps identify whether
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.
Reasons for Difference
Between Bank
Statement and
Company’s Accounting
Record
Reconciliation statement is a record book
which lists the changes that appear in
either book (cashbook or passbook). Two
broad terms cover up major challenges
due to which differences may appear:.
TWO MAJOR CHALLENGES ARE
ERRORS A BANK OR A
BUSINESS MAKE
Sometimes there is no discrepancy in
comparing entries because there is a
discrepancy in posting! This causes a
difference between the bank balance
statement and the cash book balance
shown.
TIME DIFFERENCE IN
RECORDING AN ENTRY
When a bank cross checks bank
statement and business cash book,
there are innumerable errors present
due to the time gap.
 FACTORS AFFECTING THIS TIME GAP ARE

CHEQUES ISSUED BY CHEQUES PAID

THE BANK BUT NOT DIRECT DEBITS
BUT NOT
YET PRESENTED FOR MADE BY BANK
COLLECTEDD
PAYMENT

AMOUNT
is INTERESTS
DIRECTLY
COLLECTED BY
DEPOSITED IN
THE BANK
THE BANK
 ERRORS MADE BY BANK OR BUSINESS

Errors committed by Errors committed by

Firm Bank
Wrong totaling of notes while
Wrong recording of transactions
depositing, omission or wrong
related to cheque while posting it
recording of amounts of cheques
or wrong totaling results in a
issued, etc. are some major drawbacks.
difference in cashbook and
The reconciliation addresses this major
passbook.
issue and resolves it.
 Steps to First, the date on which the statement is recorded is
mentioned.

Prepare Bank After which the balance displayed in the cash book is

Reconciliation
mentioned in the statement. Sometimes, the balance
mentioned in the passbook can also be mentioned.

Statement The deposited cheques which are not collected are

deducted.

Then the cheques issued but the deposited for

payment, but amount directly deposited in the bank
account are recorded

All the transactions like overdraft interest, amount

debited by the bank but not recorded in the cash book,
cheques and bills dishonoured are deducted.
All the credits and profit collected by the company
and directly deposited in the bank is added.

Adjustments of errors are made

Now the balance between the cash book and

statement should be equal or the same.
Advantages of a bank reconciliation statement

It identifies fraudulent activity

It helps to prevent mistakes

It keeps the account in good

standing

It helps with receivables tracking