Looking At How Bank Reconcilliation Statements Are Made Finance Essay

From clip to clip the balance shown by the bank and hard currency column of the hard currency book required to be checked. The balance shown by the hard currency column of the hard currency book must hold with sum of hard currency in manus on that day of the month. Thus rapprochement of the hard currency column is simple affair. If it does non hold it means that either some hard currency minutess have been omitted from the hard currency book or an sum of hard currency has been stolen or lost. The ground for the difference is ascertained and hard currency book can be corrected. So for as bank balance is concerned, its rapprochement is non so simple. The balance shown by the bank column of the hard currency book should ever hold with the balance shown by the bank statement, because the bank statement is a transcript of the client ‘s history in the Bankss leger. But the bank balance as shown by the hard currency book and bank balance as shown by the bank statement rarely agree. Periodically, hence, a statement is prepared called bank rapprochement statement to happen out the grounds for dissension between the bank statement balance and the hard currency book balance of the bank, and to prove whether the seemingly conflicting balance do truly hold.

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Causes of Disagreement Between Bank statement and Cash book:

Normally the grounds for the dissension are:

That our banker might hold allowed involvement which have non yet been entered in our hard currency book.

That our banker might hold debited our history for any such point as involvement on overdraft, committee for roll uping check, incidental charges etc. , which we have non entered in the hard currency book.

That some of the check which we drew and for which we credited our bank history prior to the day of the month of shutting, were non presented at the bank and hence, non debited in the bank statement.

That some checks or bill of exchanges which we have paid into bank for aggregation and for which we debited our bank history, were non realised within the due day of the month of shutting and hence, non credited by the bank.

The banker might hold credited our history with sum of a measure of exchange or any other direct payment into bank and the same may non hold been entered in the hard currency book.

That cheques dishonoured might hold been debited in the bank statement but have non been given consequence to in our books.

How to Fix a Bank Reconciliation Statement:

To fix the bank rapprochement statement, the undermentioned regulations may be utile for the pupils:

Check the hard currency book grosss and payments against the bank statement.

Items non ticked on either side of the hard currency book will stand for those which have non yet passed through the bank statement.

Make a list of these points.

Items non ticked on either side of the bank statement will stand for those which have non yet been passed through the hard currency book.

Make a list of these points.

Adjust the hard currency book by entering therein those points which do non look in it but which are found in the bank statement, therefore calculating the right balance of the hard currency book.

Fix the bank rapprochement statement accommodating the bank statement balance with the right hard currency book balance in either of the following two ways:

( I ) A First method ( Get downing with the hard currency book balance )

( two ) Second method ( Get downing with the bank statement balance )

First Method ( Get downing With the Cash Book Balance ) :

( a )

If the hard currency balance is a debit balance, deduct from it all checks, bill of exchanges etc. , paid into the bank but non collected and credited by the bank and added to it all checks drawn on the bank but non yet presented for payment. The new balance will hold with bank statement.

( B )

If the bank balance of the hard currency book is a recognition balance ( overdraft ) , add to it all checks, bill of exchanges, etc. , paid into the bank but non collected by the bank and deduct from it all checks drawn on the bank but non yet presented for payment. The new balance will so hold with the balance of the bank statement.

Second Method ( Get downing With the Bank Statement Balance ) :

( a )

If the bank statement balance is a debit balance ( an overdraft ) , deduct from it all checks, bill of exchanges, etc. , paid into bank but non collected and credited by the bank and add to it all checks drawn on the bank but non yet presented for payment. The new balance will so be agree with the balance of the hard currency book.

( B )

If the bank statement balance is a recognition balance ( in favour of the depositor ) , add to it all checks, bill of exchanges, etc. , paid into the bank but non collected and credited by the bank and deduct from it all checks drawn on the bank but non yet presented for payment. The new balance will hold with the balance of the hard currency book.

Alternatively:

Information

Cash book shows debit balance i.e. , bank statement shows recognition balance

Cash book shows recognition balance i.e. , bank statement shows debit balance

CB to BS

BS to CB

CB to BS

BS to CB

Checks issued but non presented in the bank

Add

Less

Less

Add

Cheques paid into bank but non collected and credited by the bank

Less

Add

Add

Less

Recognition, if any in the bank statement

Add

Less

Less

Add

Debit, if any in the bank statement

less

Add

Add

Less

Example 1:

On December 31 1991 the balance of the hard currency at bank as shown by the hard currency book of a bargainer was $ 1,401 and the balance as shown by the bank statement was 2,253.

On look intoing the bank statement with the hard currency book it was found that a check for $ 116 paid in on the 31st December was non credited until the 1st January, 1992 and the undermentioned checks drawn prior to 31 December were non presented at the bank for payment until the 5th January 1992. Rashid & A ; Sons $ 29, Bashir & A ; Co. $ 801, MA Jalil $ 6, Khalid Bros. , $ 132.

Fix a statement entering the two balances:

Solution:

Bank Reconciliation Statement on 31st December 1991

A

A

A

First Method:

A

A

Balance as per hard currency book – Dr.

A

1,401

Less checks paid in but non collected

A

116

A

A

A

A

1,285

Add checks drawn but non presented:

A

A

A A A A Rashid & A ; Sons

29

A

A A A A Bashir & A ; Co.

801

A

A A A A MA Jalil

6

A

A A A A Khalid Bros.

132

968

A

Balance as per bank statement – Chromium.

2,253

Second Method:

Balance as per bank statement – Chromium.

2,253

Less checks drawn but non presented

968

1,285

Add checks paid in but non collected

116

Balance as per hard currency book – Dr.

1,401

Example 2:

On 31st March, 1991 the bank statement showed the recognition balance of $ 10,500. Cheque amounting to $ 2,750 were deposited into the bank but lone check of $ 750 had non been cleared up to 31st March. Cheques amounting to $ 3,500 were issued, but check for $ 1,200 had non been presented for payment in the bank up to 31st March. Bank had given the debit of $ 35 for sundry charges and besides bank had received straight from clients $ 800 and dividend of $ 130 up to 31st March. Find out the balance as per hard currency book.

Solution:

Bank Reconciliation Statement as on 31st March, 1991

Balance as per bank statement – Chromium.

10,500

Add checks deposited but non credited

750

A

A

11,250

Less checks issued but non presented

1,200

A

A

10,050

Add bank charges made by the bank

35

A

A

10,085

Less skip in hard currency book ( $ 800 + $ 130 )

930

A

Balance as per hard currency book

9,155

Note:

Charges made by the bank $ 35 have non been recorded in the hard currency book, hence, the balance in hard currency book is more. Add to bank statement balance besides.

Dividend and sum from clients received by the bank have non been recorded in the hard currency book. Therefore, in the hard currency book there is no entry of $ 930 ( 800 + 130 ) . Deduct from the bank statement balance to set it harmonizing to hard currency book balance.