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What Is a Bank Reconciliation Statement, and How Is It Done?

In these cases, journal entries record any adjustment to the book’s balance. After fee and interest adjustments are made, the book balance should equal the ending balance of the bank account. Reconciliation is the process of comparing two different records. A bank reconciliation statement can help you identify differences between your company’s bank and book balances. From the following particulars of Jemes and Co. prepare Bank Reconciliation Statement on March 31,2021
(1) Debit Balance  as per Cash book 56,500. There is a difference in the balance as on 31st March 2019 between the bank statement and Cash Book.

  1. To successfully complete your bank reconciliation, you’ll need your bank statements for the current and previous months as well as your company ledger.
  2. Interest amounting 228 had been debited by the bank but not entered in the cash book.
  3. (1) Bank charges of $136 entered on the bank statement had not been entered in the cash book.
  4. Here is a free printable list of bank abbreviations and codes that can be found on bank statements.
  5. You are required to prepare a Bank Reconciliation Statement as on 31st March 2019.

JPN & Co, has a balance of $20,000 as per passbook as on 31st march 2021. Receive instant access to our graded Quick Tests (more than 1,800 unique test questions) when you join AccountingCoach PRO. Just remember however, if you have sales tax or VAT that has already been declared for last month, then simply follow Step 2 above. Bank reconciliations are performed twice a
month for each using bookkeeping software.

Checking the Bank Statement Against the Cashbook

These are based on manual bookkeeping, not on bookkeeping software. (8) Credit balance of Pass Book means favorable balance or (+) Plus Balance. (3)   Cheque issued but not yet presented for payment of   Rs. 52,800. It is however possible to outsource the task to a bookkeeper or accountant. In my experience it is not possible to outsource reconciliations to banks because they do not usually offer this service.

Bank reconciliation is a simple and invaluable process to help manage cash flows. Infrequent reconciliations make it difficult to address problems with fraud or errors when they first arise, as the needed information may not be readily available. Also, when transactions aren’t recorded promptly and bank fees and charges are applied, it can cause mismatches in the company’s accounting records. To quickly identify and address errors, reconciling bank statements should be done by companies or individuals at least monthly. They also can be done as frequently as statements are generated, such as daily or weekly.

ABC Corp, has a balance of $2000 as per passbook as on 31st march 2021. However, the balance as per cash book as on 31st march 2021 is  $2210. The bank reconciliation exercise and answers bank reconciliation process is a means of ensuring that the cash book of the business is reconciled to the bank statement provided by the bank.

Struggling to manage variances during bank account reconciliation?

She dates them at the date showing on the Bank Statement even though entering them after the transactions dated April 30th in the Cashbook – a mixed date order within the same month is not a huge problem. Use these exercises to practice working on bank reconciliation problems and solutions. (7) Credit balance of cash Book means unfavorable balance or(-)Minus Balance.


Again the cash book would be regarded as showing thetrue position. Outstanding deposits are also known as outstandinglodgements. A cheque payment is recorded in the cash book when the cheque isdespatched. The bank only records such a cheque when it is paid by thebank, which may be several days later.

He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University. (3) Items such as interest may appearon the bank statement but are not recorded in the cash book as thecashier is unaware that they have arisen. The contents of the cash book should be exactly the same as therecord provided by the bank in the form of a bank statement, andtherefore our records should correspond with the bank statement. Unpresented checks/cheques and unpresented deposits must all be calculated into the mix using a Bank Reconciliation Worksheet (not entered as adjustments in the Cashbook as previously mentioned). Here is a free printable list of bank abbreviations and codes that can be found on bank statements.

(8) Interest on bank overdraft charged by bank Rs. 8,000. (6)  Interest on bank overdraft charged by bank Rs. 10,000. How to fix the problem depends on whether you are using book-keeping software or keeping a manual cash book. Below are suggestions for both, but first, you need to find out what caused the problem in the first place.

This covers a range of different codes used by different banks in different countries. (9) Direct payment by the bank not entered in cash book 40,000. Bank reconciliation helps to identify errors that can affect estimated tax payments and financial reporting. If you need a refresher course on this topic you can view our bank reconciliations tutorial here. (4) A cheque drawn for $6 had been incorrectly entered in the cash book as $66. Now Rose is ready to reconcile the bank statement and cashbook.

Reduce Errors With Bank Reconciliation Solutions

Rose then enters the amounts into the Reconciliation section of the worksheet. The check/cheque number 0004 dated 27th April is not on the Bank Statement so Rose writes it down in the Unpresented Checks/Cheques box of the Bank Reconciliation Worksheet. At this stage Rose could also go back to the Bank Statement and tick off the highlighted transactions to show that they have now all been dealt with. All names of people and businesses in these exercises are fictitious and made up from my imagination.

A bank reconciliation statement is a valuable internal tool that can affect tax and financial reporting and detect errors and intentional fraud. From the following particulars of Sohna and Co. prepare Bank Reconciliation Statement on March 31,2021
(1) Credit Balance/overdraft  as per Cash book 56,500. The cash account balance in an entity’s financial records may also require adjusting in some specific circumstances, if you find discrepancies with the bank statement.