Bank Reconciliation Statement (General understanding)

Accounting concept

A Bank reconciliation is a process that explains the difference between the bank balance shown in an organization’s bank statement, as supplied by the bank, and the corresponding amount shown in the organization’s own [accounting] records at a particular point in time.

Bank Reconciliation Statement is a statement prepared to reconcile the balances of cash book maintained by the concern and pass book maintained by the bank at periodical intervals. At the end of every month entries in the cash book are compared with the entries in the pass book. The causes of differences in balances of both the books are scrutinized and then reconciliation statement is prepared. This statement is prepared for a special purpose and once in a month. It is prepared with a view to indicate items which cause difference between the balances as per the bank columns of the cash book and the bank pass book at a particular date.

The Main reasons which cause Pass Book of the bank and your Bank Book not Tally are

Cheques deposited into the bank but not yet collected.

Cheques issued but not yet presented for payment.

Bank charges.

Amount collected by bank on standing instructions of the concern.

Amount paid by the bank on standing instructions of the concern.

Interest debited by the bank.

Interest credited by the bank.

Direct payment by customers into the bank account.

Dishonour of cheques.

Clerical errors.