Bank reconciliation statement

Bank reconciliation statement :-
                 
               A form that allows individuals to compare their personal bank account records to the bank's records of the individual's account balance in order to uncover any possible discrepancies. Since there are timing differences between when data is entered in the banks systems and when data is entered in the individual's system, there is sometimes a normal discrepancy between account balances. The goal of reconciliation is to determine if the discrepancy is due to error rather than timing.

How to Prepare a Bank Reconciliation Statement :-

     To prepare the bank reconciliation statement, the following rules may be useful for the students:

1.  Check the cash book receipts and payments against the bank statement.

2.  Items not ticked on either side of the cash book will represent those which have not yet passed through the bank statement.

3.  Make a list of these items.

4.  Items not ticked on either side of the bank statement will represent those which have not yet been passed through the cash book.

5.  Make a list of these items.

6.  Adjust the cash book by recording therein those items which do not appear in it but which are found in the bank statement, thus computing the correct balance of the cash book.

7.  Prepare the bank reconciliation statement reconciling the bank statement balance with the correct cash book balance in either of the following two ways:

(i)  First method (Starting with the cash book balance)
(ii) Second method (Starting with the bank statement balance)

Example :-

On December 31 1991 the balance of the cash at bank as shown by the cash book of a trader was $1,401 and the balance as shown by the bank statement was 2,253.

On checking the bank statement with the cash book it was found that a cheque for $116 paid in on the 31st December was not credited until the 1st January, 1992 and the following cheques drawn prior to 31 December were not presented at the bank for payment until the 5th January 1992. Rashid & Sons $29, Bashir & Co. $801, MA Jalil $6, Khalid Bros., $132.

Prepare a statement recording the two balances:

Solution:

Bank Reconciliation Statement on 31st December 1991
First Method:
Balance as per cash book - Dr.		1,401
Less cheques paid in but not collected		116
		1,285
Add cheques drawn but not presented:
Rashid & Sons	29
Bashir & Co.	801
MA Jalil	6
Khalid Bros.	132	968
Balance as per bank statement - Cr.		2,253
Second Method:
Balance as per bank statement - Cr.		2,253
Less cheques drawn but not presented		968
		1,285
Add cheques paid in but not collected		116
Balance as per cash book - Dr.		1,401