Is a statement that compares the banks statement and a companys accounting records

What is a Bank Reconciliation Statement?

A bank reconciliation statement is a form used to compare internal records of checking account activity to those stated by the bank. It itemizes the deposits, withdrawals, and other activities impacting the checking account for a one-month period. The intent of the statement is to uncover any differences between the two sets of information, which can then be corrected. The following are some of the discrepancies that it can be used to uncover:

• Timing differences. This can be caused by deposits made by the account holder that have not yet been recorded by the bank, or by checks issued by the account holder that have not yet been presented to the bank.

• Fees. The bank may have charged an account servicing fee, a not sufficient funds fee, a lifting fee, an overdraft fee, or a variety of other charges that the account holder has not yet recorded.

• Electronic payments. The bank may have received electronic payments into the account, or processed electronic payments from it (such as an ACH debit transaction), of which the account holder was not aware.

• Errors. Either the account holder or the bank may have recorded deposits, checks, or other charges in error.

Once uncovered, the account holder either contacts the bank to notify it of errors made by the bank or (more likely) adjusts its own records to bring them into alignment with the bank's records, net of any timing differences.

Many banks include a blank bank reconciliation statement in their month-end account statements, for the use of account holders. Providing this form is also useful for the bank, since it encourages account holders to attend to the transactions flowing through their accounts, and so clears up any long-term confusion about account balances.

A more proactive business may elect to update a bank reconciliation statement on a daily basis, using account information made available on-line by its bank; doing so allows the company to spot errors or even possible cases of fraud much more quickly than would be the case with a month-end reconciliation.

How to Prepare a Bank Reconciliation Statement

Follow these steps to prepare a bank reconciliation statement (the precise steps will vary, depending on the layout of the form being used):

1. Enter the cash balance recorded by the bank at the top of the form.

2. Subtract the total of all checks that have not yet cleared the bank.

3. Add the total of all deposits in transit to the bank.

4. Subtract the cash balance recorded by the account holder.

5. Investigate any remaining variances and adjust as necessary. The eventual result should be a variance of zero.

It is much easier to fill out an online bank reconciliation statement, which is a commonly-provided module in many accounting software packages. In an online statement, you check off all deposits and checks recorded by the bank, leaving just in-transit and other residual items for further examination. After a few iterations to record variances from the bank's records, the online form should present a net zero variance. At that point, print the statement and store it with the month-end closing records.

Bank Reconciliation Record Keeping

Bank reconciliation statements should be retained and archived by period, so that they are readily accessible when needed during the annual audit. The auditors will want to verify the preparation of this statement for at least the year-end bank reconciliation. In addition, if the auditors have chosen to engage in interim audit procedures, they may elect to review the most recent reconciliation as of that date.

Presentation on theme: " Bank reconciliation statement is a report which compares the bank balance as per company's accounting records with the balance stated in the bank statement."— Presentation transcript:

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2  Bank reconciliation statement is a report which compares the bank balance as per company's accounting records with the balance stated in the bank statement  The term reconciliation simply means to bring together  One reason may due to ERRORs made by the company or by bank. But there are many other reasons that cause the difference.

3 BANK STATEMENT CASHBOOK

4  Cheques Outstanding/Unpresented cheques (Cr.): cheques which have been issued by the company but were not presented or cleared before the issuance of bank statement.  Deposits in Transit (Cr.): Deposits which have been sent by the company to the bank but have not been received by the bank at proper time before the issuance of bank statement. (bank lodgement not yet credited)  Dishonoured cheques (Dr.): These are the cheques deposited by the company in bank account but the bank has failed to ‘honour’ the cheque. May due to : ◦ NSF cheque = not sufficient funds ◦ Stale cheque = cheque presented at the paying bank after a certain period (typically six months) of its payment date ◦ Signature does not match, error in wordings of amount etc.

5  Service Charges (Cr.): Service charges may have been deducted by the bank. Such charges are usually not known to the company before the issuance of bank statement.  Interest Income (Dr.): If any interest income has been earned by the company on its bank account, it is not usually entered in company's cash account before the issuance of bank statement.

6  Standing Orders (Cr.): an instruction a firm gives to the bank to pay a set amount at regular intervals to another's account.  Direct Debit (Cr.): an authorization to the creditors, typically used for recurring payments, such as utility bills, where the payment amounts vary from one payment to another  Credit transfers (Dr.): amounts being paid directly into our bank account. They are normally from other customers, or other people who owe the firm money

7 Confirm this figure by referring to Bank Statement Company A Bank Reconciliation December 31, 2011 Balance as per cash book19,000.00 Add: Interest Income234.00 Credit Transfer134.00 368.00 19,368.00 Less: Dishonoured Cheque543.00 Service Charge254.00 Direct Debit321.00 Standing Order987.00 (2,105.00) Balance in statement of financial position17,263.00 Less: Deposit in Transit(865.00) Add: Outstanding Cheque654.00 Balance as per bank statement17,052.00

8  OTHER FORMAT: This format is to prepare the adjustment of both cashbook and bank statement. So there will be a balancing figure. Whereas, the first format is to show the agreement btw the balance of cashbook and bank statement. Company A Bank Reconciliation December 31, 2011 Balance as per cash book19,000.00 Add: Interest Income234.00 Credit Transfer134.00 368.00 19,368.00 Less: Dishonoured Cheque543.00 Service Charge254.00 Direct Debit321.00 Standing Order987.00 (2,105.00) Adjusted balance as per cash book17,263.00 Balance as per bank statement17,052.00 Add: Deposit in Transit865.00 Less: Outstanding Cheque(654.00) Adjusted Balance as per bank statement17,263.00

Is a statement that compares the bank statement?

What is a reconciliation statement?

What is a bank statement in accounting?

What is a bank reconciliation statement in accounting?