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BANK RECONCILIATION STATEMENT

• INTRODUCTION:-

Bank Reconciliation Statement means a statement indicating the reasons or causes of non- matching the balance given in pass book & bank book.

Generally BRS is prepared by bank or different companies on regular basis at interval of 15 days or one month. BRS is prepared for a good control over receipt & is of cheque & bank transaction.

• MEANING:-

As a matter of fact balance shown by the bank a/c & by the bank pass book (customer’s a/c) on a particular date must tally. But in actual practice they differ due to reasons given below. It therefore becomes necessary to reconcile the difference to ascertain that there are no mistakes committed. Thus a Bank Reconciliation Statement is a statement prepared to reconcile the difference between the balance as shown by the bank a/c in a cash book & by the bank pass book on a particular day.

• DEFINITION:-

Bank reconciliation statement is defined as “A statement is prepared to reconcile the difference between the bank balance as shown in the bank column of cash book & the balance as per pass book on a particular day.”

• Reasons for Difference in Balance:-

Some of the transactions are entered in cash book only whereas some are entered in the pass book only. In addition to this there may be some mistakes committed either in the cash book or in the pass book.

1. Cheque issued but not presented for payment: When a cheque is issued, bank a/c is at once credited, but the customer’s a/c is debited by the banker only when the payment of that cheque is effected by the bank.
2. Cheque paid or deposited but not collected or credited by bank: When a cheque is received & paid into the bank the customer debit at once the bank a/c in his cash book but the customer’s a/c is credited by the banker only when the cheque is collected by the bank.
3. Bank charges debited by bank: Bank charges are debited to customer account. But it is not intimated to the account holder. These entries are not recorded in the cash book so far the pass book is updated. Hence the pass book shows the less balance than the cash book.
4. Interest allowed or charged or credited by bank: – Bank normally gives interest to their customers quarterly or six monthly. And it is not informed to the customers. After getting the pass book updated then the customer realizes that the amount for interest is credited by bank in the pass book. Hence the pass book balance is increased to the extent of cash book.
5. Direct deposit into bank account by customer: Sometimes the customers or any person directly deposit the cash into the bank account. It is not noticed by the trader until the pass book is updated. Hence because of that the balance of the pass book increases than the cash book. So the difference arises between these two.
6. Standing instructions given by the customer:- As per the instructions given by the customer, bank makes the payment to the various parties like electricity, telephone, sale of securities, loan installment, house rent, club subscription, insurance premium, purchase of securities on behalf of a customer.
7. Bills receivable discounted into bank being dishonoured:– The bills receivable are discounted into the bank by the customers. If such bills are dishonoured then the bank is passing the reverse entry in the customer’s account. Hence to that extent the pass book balance is reduced & the cash book balance is increased because that entry is not passed so far it is intimated by the bank.
8. Errors in writing:– Certain errors are committed by the accountant of the customer or the clerks of the bank like totalling mistake, wrong posting, errors in balancing etc. this type of error is effected to the match the balance of cash book & pass book.