Accounting – Bank Reconciliation Statement

Accounting - Bank Reconciliation Statement

When the phrase “to reconcile” is used in accounting, it means making two sets of figures agree. For instance, if we estimate that a certain amount of profit should be made in a given period of time and we fail to achieve the target at the end of that period, the accountant may seek to reconcile the targeted figures and what was actually achieved when performing bookkeeping (Also see Difference between Accounting and Bookkeeping). He will then have to examine the reasons for the discrepancy.

Similarly, a bank account shown in our ledger may need to be reconciled with a bank’s ledger as shown in the bank statement. This means that the cash bank balance must be compared with the bank statement.

Important facts while preparing a bank reconciliation statement (Also see Why is it important to reconcile the bank statement monthly):

    • Check the total of the bank column in the business’ cash book to find out if there are mistakes in totaling.
    • Compare the amounts recorded in the cash book and that recorded in the bank statement. If any discrepancy is noted, write it in your note book.
    • Items in the cash book and items in the bank statement on specific dates must be compared.
    • Check your records on the incoming and outgoing cheques.
  • Take note of the starting and the ending points of your bank statement including the balance on the bank statement and the cash book.

If you choose to start with a balance as per the cash book’s bank column, the answer you get should give you the balance as per the banks statement. Alternatively, if you choose to start with the balance as per the bank statement, the answer you arrive at should be the balance of the cash book.

Balance as per cash book: It is also referred to as the cash book balance. It is the balance in the cash book as maintained by you. Check if:

The total of the debit column exceeds the total of credit side of the bank column (debit balance)

The cash book credit balance exceeds the debit balance in the bank column. (Credit balance). This is treated as an overdraft.

This happens when the withdrawals exceed the deposits made.

Lastly, check the balance as per your bank statement. Any amount deposited by your customers will always be recorded on the credit side of his account.

To reconcile the statements, take note of all items that appear in the bank statement, but which are not appearing in your cash book and make the necessary entries. Also check out items that appear in your cash book but, which are not appearing in the bank statement and make adjustment. If you are still not confident, you can consider getting accounting service in Johor Bahru .

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