Bank Reconciliation Statement

Bank Reconciliation Statement: It is used to maintain track of company transactions. The discrepancy between the bank statement and the general ledger is recorded in the bank reconciliation statement.

The amount mentioned in the bank statement and the amount recorded in the organization’s accounting book kept by the Chartered Accountant might be different. A BRS audits entries on a regular basis to ensure that there are no discrepancies in the future. A BRS is a set of records that correspond to a cash account entry on a bank statement. BRS examines the discrepancy discovered between the two and makes the necessary adjustments.

A bank reconciliation statement is a financial document that summarises company activities and reconciles financial information. It guarantees that payments are processed on time and that funds are deposited on the same day. Once a month, an accountant creates the reconciliation statement.

Bank Reconciliation Statement

The bank creates a monthly bank statement that includes cash deposits and withdrawals. The accountant’s hand enters the identical entries in the accounting record book. Errors may occur due to differences in publishing companies. Bank reconciliation aids in the replacement of such discrepancies. To put it another way, to get rid of two separate copies of the same document.

• The company’s cheque was not delivered for payment.

If a corporation writes a check and it is not turned in for payment before the end of the month (i.e. the period of BRS creation), it will not be included as a debit amount. This might lead to a disparity.

• Deposits that are recorded in the ledger but not on the bank statement

The depositor may make a deposit into his account. It will make a difference if the payment is not reported in the bank statement. A depositor, on the other hand, will never forget to make an entry for it.

• Rates of interest may vary.

Interest rates fluctuate from one bank to the next. There may be entries in the ledger that have a tiny discrepancy in interest. Also, there’s a chance that certain entries’ interests may show up in the ledger!

• It’s possible that service costs aren’t applied correctly.

Banks provide a variety of services to its customers, each with its own set of fees. Service costs, like interest rates, might be overlooked.

• NSF Check may result in an error.

The problem of NSF (Not Sufficient Funds) is a hot topic. After receiving a check, bank authorities deposit funds into the beneficiary’s account. It deducts the money from the beneficiary’s account if a sufficient quantity is not available in the payee’s account. The bank marks the check as NSF and sends it back to the payee. The input might be stored as an additional amount, resulting in a ledger mistake.

How to Make a Bank Reconciliation Statement (Steps)

• Initial Inspection

To begin, compare the entries in the bank statement and ledger cash account of the firm. Matching records should be checked off. Check to see that all ledger entries match the bank account statement. At this point, reconciliation eliminates fundamental flaws.

• Check Into Account

Mark any things that remain in the ledger after the first check is completed. Include any transit deposits that were recorded in ledgers but did not show on the bank statement. As a result, transactions performed right before bank holidays or during non-working hours result in transit deposits.

Transit deposits are those that are presently pending and hence cannot be shown on a bank statement.

• Earned interest

Add up the interest you’ve earned, keeping exact interest rates in mind. It only applies to accounts that pay interest.

• Errors at the bank

After all, bank employees are human beings just like us. They might make a mistake and mix together entries from two distinct account statements. It’s also possible that they’ll make mistakes. Add or remove bank mistakes as needed. Checks that are outstanding Subtract any outstanding checks from the total sum.

• Check for inaccuracies in the ledger.

A bank offers services for which it charges a fee. Charges such as transfer fees, account management fees, late payment fees, and so on. Charges for bank service are deducted from the ledger.

• Verify the Reconciliation

A payment that was not completed may be recorded in the ledger. Make the required changes. Before putting it in the bank statement, double-check it. Calculate the Final Balance. To complete reconciliation, the whole balance must equal.

• Entries in the Journal

You may need to prepare certain journal entries as part of this procedure to remedy inaccuracies. These are inaccuracies that occur during the comparison of bank statements and general ledgers.

The Importance of a Bank Reconciliation Statement

Bank Reconciliation Statement: It’s pointless to suggest that banks are untrustworthy. However, there’s no danger in comparing bank statements to ledgers. After all, bank accounts are where we keep our money.

Separation of responsibilities allows for faster correction of faults. As a result, error detection and repair are required. Neither the bank nor you want to lose money. Reconciliation also aids in the monitoring of a company’s financial flow.

A monthly reconciliation is usually suggested by a basic timetable. For example, suppose you’re in charge of a large-scale firm with more than 50 transactions every week. Cash accounts need to be reconciled on a regular basis. A reconciliation might be completed in 15 days or once a week.