Bank Reconciliation Statement

It is a statement prepared to reconcile the difference between the balances, as per the bank column of the cash book and pass book on any given date.

Reasons of Difference Between Cash Book and Pass Book

There are several reasons due to which a difference in the balance of pass book and cash book takes place.

These are as follows:

(i) Cheques issued by the firm but not yet presented for payment.

(ii) Cheques deposited into bank but not yet collected.

(iii) Amount directly deposited in the bank account.

(iv) Interest allowed by bank.

(v) Interest and expenses charged by bank.

(vi) Bills receivable collected by bank on behalf of customer.

(vii) Bank charges.

(viii) Interest and dividend received by the bank.

(ix) Direct payments made by the bank on behalf of the customer.

(x) Cheques/Discounted bills dishonoured.

(xi) Errors committed in recording transactions by the firm.

(xii) Errors committed in recording transactions by the bank.

Need and Importance of Bank Reconciliation Statement Bank reconciliation statement is important because:

(i) It ensures the accuracy of the balances shown by the pass book and cash book.

(ii) It provides a check on the accuracy of entries made in both the books.

(iii) It helps to detect and rectify any error committed in both the books.

(iv) It helps to update the cash book by discovering some entries, not yet recorded.

(v) It indicates any undue delay in the collection and clearance of some cheques.