Bank Reconciliation Statement With An Example

Bank Reconciliation Statement is a statement prepared mainly to reconcile the difference between the 'Bank Balance' as shown by the Cash Book and the 'Bank Balance' shown by the Bank Pass Book. It is prepared to verify the accuracy of the entries made in the cash book and passbook.

Causes of differences between the bank balance as per cash book and pass book

The causes of differences between the bank balance as per cash book and pass book may be broadly divided into two parts:

1. Errors of commission on the part of the person writing the cash book

For example, a cheque amounting Rs 10980 has been deposited in the bank and has been entered as Rs 10890 in the bank column of the cash book but bank has credited the account with the correct amount i.e. Rs 10980. In such a case, balance as shown by books will not agree.

2. Recording of some transaction in one book and non-recording in another book

For example, cheque issued but not presented for payment. It means that the issue of cheque has been recorded in the cash book but the same has not been recorded in the passbook. A few examples are:

• Cheques paid into the bank for collection but not yet credited by the bank.
• Cheques issued but not yet presented for payment in the bank.
• Cheques paid or deposited in the bank for collection but dishonoured.
• Interest allowed or credited by the bank.
• Bank Charges and Commission charged by the bank.
• Interest charges by the bank on overdraft.
• Direct deposit by customer into the bank.
• Interest and dividend directly collected by the bank.
• Cheques deposited but omitted to record in the cash book.
• Cheque issued to a creditor but omitted to be record in the cash book.
• Error in totalling or balancing the bank column of the cash book.

Let us understand with an example while preparing a bank reconciliation statement as on 31st Mar 2022 from the following particulars as mentioned below

• Bank balance as per cash book as on 31st Mar 22 was 75000.
• Cheques amounting Rs. 20000 were deposited into Bank on 31st Mar 22 but were collected and credited by the bank on 2nd Apr 22.
• A cheque of Rs. 20000 was issued on 28th Mar 22 but the same was presented to the bank after 31st Mar 22
• Interest on investment Rs 15000 was collected by the bank but not recorded in the cash book.
• The insurance premium was paid and debited by the bank Rs. 5000 but it was not recorded in the cash book.
• A cheque of Rs. 3500 was deposited and credited by the bank but was omitted to be recorded in the cash book.
• A cheque of Rs. 2000 received from Arun and recorded in the bank column of the cash book but was omitted to be deposited into the Bank.

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