Bank Reconciliation Statement in Accountingces

Bank Reconciliation Statement in Accounting

Bank Reconciliation Statement in Accounting

What Is a Bank Reconciliation Statement?

A bank reconciliation statement is a summary of banking and business activity that reconciles an entity’s bank account with its financial records. The statement outlines the deposits, withdrawals, and other activities affecting a bank account for a specific period. A bank reconciliation statement is a useful financial internal control tool used to thwart fraud.

How to prepare a bank reconciliation statement?

A bank reconciliation statement (BRS) involves the process of identifying the transactions individually and matching it with the bank statement such that the closing balance of the bank in books matches with the bank statement. For one which is not matched, suitable adjustments or corrections will be done in the book to match it.

Bank Reconciliation Process

 

The first screenshot indicates the bank ledger balance as per the company books of records for the period of April 2017.

The above second screenshot indicates the passbook balance as per the bank statement for the period of April 2017.

Step 1

First, you have to download the bank statement for the reconcile period.

Step 2

You have to verify as per the company books of accounts all issued cheques have been cleared by the bank during the reconciliation period (April 2017).

You have to verify as per the company books of accounts all deposited cheque payments have been collected by the bank during the reconciliation period (April 2017).

For example, received a cheque from the customer on 28th April 2017, the same has been deposited in the bank. However, it may take a few days to clear the bank account. Hence the balance as per the bank ledger in Tally will not match with the balance as per the bank statement, because, you have recorded the cheque deposited entry on 28th April 2017 in Tally but the cheque got cleared on 1st May 2017.

Bank Reconciliation Process

 

It makes accounts to be in good standing.
Keeping your account in good standing through bank reconciliation means that, when you are aware about the amount that you can spend in your account, you are less likely to overdraw the account, which means withdrawing or attempting to withdraw more money than what your account have. Keep in mind that overdrawing will negatively affect your credit score and can prompt the bank to charge you fees. While some financial institutions offer overdraft protection, most often they would charge you or your company a fee for using such a service. And if you do not have such type of protection on your account, you will suffer worse consequences.

Also Read:-

Cash Definition, How to Manage Petty Cash

What is The Financial Year in India

What are The Types of Loan In India

3 thoughts on “Bank Reconciliation Statement in Accounting”

  1. Pingback: Definition of TDS in Accounting - myaccountingfunda

  2. Pingback: Inventory Maintain in Accounting - myaccountingfunda

  3. Pingback: Accountant job In Office - myaccountingfunda

Leave a Comment

Your email address will not be published.