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Need for Reconciliation

In general, when a comparison is made between the bank balances as shown in the firm's cash book, the two balances do not tally. Hence, we have to first ascertain the causes of difference thereof and then replicate them in a statement called Bank Reconciliation Statement to reconcile (tally) the two balances.

To prepare a bank reconciliation statement we should have the details of bank balance as per the cash book and a bank statement as on a particular day along with details of both the books. If the two balances differ, then the entries in both the books are compared and the items on account of which the variation has been raised are ascertained with the details of amounts involved so that the bank reconciliation statement may be prepared.

Proforma of a Bank Reconciliation Statement
 

Particulars

Amount

Rs.

 

Add:

 

 


Less:


Balance as per cash book

Cheques issued but not presented

Interest credited by the bank


Cheque deposited but not credited by the bank

Bank charges not recorded in the cash book


Balance as per the passbook.

 

.............

.............

............

________

...........

...........

________

XXXXX

________

Fig. 5.2: Proforma of bank reconciliation statement

 

It can also be prepared with two amount columns one showing additions (+ column) and another showing deductions (-column). For convenience, we usually adopt this method:

 

 

Particulars

Amount

Rs.

Amount

Rs.

 

Balance as per cash book

Cheques issued but not presented

Interest credited by the bank


Cheque deposited but not credited by the bank

Bank charges not recorded in the cash book

Balance as per the passbook.

 

.............

.............

............

________

 

 

 

 

 

..............

..............

 

________

XXXXX

________

Fig. 5.3: Proforma of bank reconciliation statement (table form)

 

The specimen copy of a Bank passbook (current account) is as follows:

Fig. 5.1: Specimen of bank statement (current account)

 

Reconciliation of the cash book and the bank passbook balance leads to an explanation of differences between them. The reason for the differences between the cash book and the bank passbook are:
  • Timing differences on recording of the transactions.
  • Errors made by the business or by the bank.




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