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Bank Reconciliation Statement

Normally, at the end of each month, the entries in the cash book are compared with entries in the pass book. The exact causes of differences between the balance as shown by the cash book and the balance as shown by the pass book are scrutinized and then a reconciliation statement is prepared, commonly called a Bank Reconciliation Statement. This statement is prepared with a specific purpose, viz., to reconcile the two balances, and is prepared generally once in a month.

A Bank Reconciliation Statement can be defined as a statement prepared at periodical intervals, with a view to indicate the items which cause disagreement between the balances as per the bank columns of the cash book and the bank pass book on any given date.

Need and Importance

1.  A bank reconciliation statement, the customer becomes sure of the correctness of the bank balance shown by the Cash Book. It helps him in making the further transactions with the bank.

2.   A reconciliation statement. Locates the errors or omissions that may have been commited either on the part of the customer or the bank. The errors so detected can be rectified accordingly.

3.    A reconciliation statement facilitates the preparation of a revised Cash Book.

4.    Periodic preparation of this statement reduces the chances of embezzlement by the staff of the firm or even that of the bank.

5.   A reconciliation statement helps in revealing the unnecessary delay in the collection of cheques by the bank.

6.   It also helps in keeping a track of cheque which have been sent to the bank for collection.


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