Bank Reconciliation Statement

Bank reconciliation statement (BRS) is a report which compares the bank balance with the balance stated in the books of accounts of the assesse on a particular date. Sometime the transactions are accounted for in the bank's financial system before the company incorporates them into its own accounting system. Such timing differences appear as reconciling items in the Bank Reconciliation Statement.

Always keep in mind the balance of two books must tally with each other, if we credit any transaction in our books it will be debited by bank in our account, for example- When money is withdrawn from the bank, firms enters it on the credit side of the bank column of the cash book and at the same time banks also enters it on the debit side of the firms account in its book.  On the other hand if the firm has deposited any amount in bank, the firm enters it on the debit side in his books of accounts and bank also enters it on the credit side of the firms account.

• BRS help us against detecting fraudulent transactions committed either on the part of the customer or the bank.
• BRS help us to keep watch on all transactions like bank charges, bank interest etc.
• BRS help us to make proper entries in our books of accounts regarding their receipts from debtors etc. i.e. payments received through NEFT/RTGS/IMPS etc which can be reconciled with the bank statement.
• BRS help to keep our attention on all payments made through cheque, whether they cleared or not till the date.
• BRS also help us to reduce errors like double entry, transactions not accounted for or missing entries etc.

1. First, to compare opening balances of bank account shown in our books of accounts with the bank statement on a particular date. If there is any difference in opening balance take previous reconciled BRS or watch the difference, which could be due to wrong entry in back date, pending cheques etc, update the same in current BRS.
2. Then compare credit side of the bank statement with debit side of the bank account shown in our books of accounts, note the difference between them.
3. Then comes to debit side of the bank statement with the credit side of the bank account in our books of accounts, note the same as above.
4. Analyze the above entries shown above.
5. Pass/correct the necessary entries in your books of accounts and keep watch on unusual transactions.
6. The resultant figure must be equal to the balance as per the bank statement.

• Debit Balance (Favourable balance) as per books of accounts of assesse
• Credit Balance (Unfavourable balance or Overdraft balance) as per books of assesse
• Debit Balance (Unfavourable balance or Overdraft balance) as per bank books
• Credit Balance (Favourable balance) as per bank books

Format of Bank Reconciliation statement-

Example 1-

1. Bank balance in our books of accounts Rs.1,33,500 (Debit)

2. Cheques deposited into bank but not credited till the date

• 22.11.2018 Cheque No. 325006 of Rs.9,500
• 25.11.2018 Cheque No. 000251 of Rs. 18,200

3. Cheques issued but not presented for payment

• 15.11.2018 Cheque No. 251005 for Rs. 12,500
• 25.11.2018 Cheque No. 251009 for Rs. 19,300

4. Bank credited dividend through Electronic Clearing System for Rs. 3,500 on 24.11.2018

5. Bank charges debited by Bank

• On 01.11.2018 Rs. 325
• On 15.11.2018 Rs. 250
• On 23.11.2018 Rs. 125

6. Balance as per bank statement as on 30.11.2018 Rs. 1,40,400

Answer- First method of reconciliation after taking balance as per our books-

We should pass necessary entries in our books of accounts, these are as below-

Or

Answer-Second method of reconciliation after taking bank balance -

1. Difference due to time gap in recording the transactions

• Cheque Issued but not presented for payment- These cheque’s are issued by us for payment to creditors, repayment of loan, purchase of assets or against expenses etc., but  not  presented for payment in the bank as on date.
• Cheque Received but not cleared- These cheque’s are received from debtors, but not cleared as on date.
• Payment received through electronic form like RTGS/NEFT/IMPS etc.- These payments are received in the electronic forms, which can be taken in our books of accounts on receipt basis.
• Service Charges- The entries of service charges like Bank charges, commission, insurance payment, stock audit etc. charged by bank directly from our account.
• Interest/ Dividend received- Any amount of Interest/Dividend etc. directly credited by bank in our account.

2. Difference due to errors i.e. wrongly entered/ double entered

• Wrongly/Double Entry- Any entry which can be taken by mistake/ wrongly or entered by twice a time either by bank or by an account in our books of accounts, for example cheque issued to creditors but not recorded in books of accounts or cheque received but not recorded in books of accounts by the firm etc.