Steps to prepare Bank Reconciliation Statement

The concept of Bank Reconciliation Statement

In bookkeeping, Bank reconciliation statement is a record creates as part of the foundation which inserts out the entries which have generated the contrast between the two balances. For adjusting the balances as displayed in the passbook and cash book a settlement statement is prepared known as Bank Reconciliation Statement.

A firm directs a cash book to register both banks as well as cash transactions. A Cashbook has a bank column which displays cash at a bank and a cash column which displays cash accessible with the firm. Bank retains an account for every consumer in their books. All the withdrawals are on the debit side of their account and deposits registers on the credit side of consumer’s account. An account statement transfers daily to the consumers by the bank.

At times the bank statement and bank balance as per cash book and doesn’t get equal. In fact, the bank column of the cash book doesn’t match balance accessible in the passbook, the firm should recognise the causes for the same. It is important to settle the variations in bank and cashbook.

Why the bank reconciliation statement is prepared?employment provident fund

Bank reconciliation is the method of checking the uprightness of data between a company’s financial records and bank records. It starts with balancing the balances in entity data on a bank statement and accounting documents for a cash account that needs to the identical.

The reason for the preparation of a bank reconciliation statement is:

  • Direct Debit is a strong reason for bank reconciliation statement preparation. In many cases, the firm gives directions to the bank to pay the amount outstanding instantly to the payee on the due date. In this way, the bank debits the firm’s account. The firm skips making an entry in the cash book.
  • The fault in Registration of the transactions. While making cash book entries the firm might make some mistakes. The mistake can be like wrong balancing, dropping out sale entry or other relevant transactions and recording transactions in different ledgers which should be entered in the cash book. All these points to the contrast in balances between the pass book and cash book
  • The Credit Transfer is also a reason for generating a bank reconciliation statement. Many times without giving any notification to the firm the debtor’s deposit money into the firm’s bank account. In that case, the bank credit the transaction to the firm’s account and doesn’t register in the cash book that makes a huge difference.
  • Cheques transferred into the bank are debited by the firm quickly which in change and develops their bank balance. In this case, the bank credits firm’s account when these cheques are really recognised after a few days. So, the variation remains until these-cheques are settled.

How to prepare a bank reconciliation statement?

A bank reconciliation is the balancing of a bank account balance with the company’s cash account balance. Their so no bar in making bank reconciliation statement as a small and large both firm have to make these statements. Even the small banks and payments banks require bank reconciliation statements, it’s compulsory. For preparing a bank reconciliation statement you have to follow major steps.

  • Step 1

Firstly an accountant must verify that the opening balances of bank book are matching and bank statement with the balances as per previous bank reconciliation statement.

Bank Reconciliation statement

  • Step 2

Working on the cash balance displayed on the bank statement, attach after all deposits in transition.


Bank reconciliation statement

  • Step 3

Tick upon all the items resembling in both the records. Examine the debit side of the bank statement with the credit side of the bank column of the cash book. The credit side of the bank statement with the debit side of the bank column of the cash book.

Bank reconciliation statement

  • Step 4

Analyze the entries both in the bank column of the passbook as well as cash book. See for entries which fumble to post in the bank column of the cash book. Create a record of such entries and gain significant alterations in the cash book. Right all errors or omissions resemble in cash book. Determine the edited and updated balance of cash book’s bank column.

Bank reconciliation statement

  • Step 5

Combine the deducted un-credit cheques and un-presented cheques.

bank reconciliation statement-img1


  • Step 6

Create all the vital changes for bank errors. If the bank reconciliation statement starts with the debit balance as per the bank column of the cash book, calculate the sum of the values incorrectly credited by the bank. It will decrease all the values incorrectly credited by the

  • Step 7

As a result, all the figure must be equivalent to the balance as per the bank statement.
Bank reconciliation statement


Rules of credit and debit

The value of amounts withdrawn by the consumer are debited in his account and the value of the amount transferred by its consumer is credited to his account in Bank’s ledger. When a credit balance is higher than the debit balance, it is called credit balance as per the Pass Book.

Bank reconciliation statement

The idea of preparing a bank reconciliation statement is it exhibits the actual bank balance status. Re-tick errors in passbook and cashbook. It limits fraud in recounting banking transactions. It recognises the legitimate transaction entered by the firm.

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By | 2019-04-03T10:31:18+00:00 April 3rd, 2019|Others|Comments Off on Steps to prepare Bank Reconciliation Statement

About the Author:

Sarubpreet Kaur has Post-Graduated in Journalism and Mass Communication from Aligarh Muslim University and currently working as a Content Writer at Finbucket. She is a creative content writer who can make the article thought-provoking. The virtues that she holds are dedication, integrity, loyalty, and hard work.