Bank reconciliation statement is a list in which are indicated the various items that cause a difference between the bank balance as per cash book and pass book on any given date. This statement bridges the gap between the balance shown by the cash book and the pass book. From this article I explain bank reconciliation template and one example. From these details new accounting students can easily understand. On my last accounting class lot of students asked Define Bank Reconciliation. That’s the main reason I write up this article in Accountingweb.
It is defined as, it is a list in which the various items that cause a difference between bank balance as per cash book and pass book on any given date are indicated. It is a report which compares the bank balance as per entity’s accounting records with the balance stated in the bank statement or books. The main purpose is to detect any discrepancies between the accounting records of the entity and the bank besides those due to normal timing differences. Such discrepancies might exist due to an error on the part of the business concern or the bank.
It is a process that explains the difference between the bank balance shown in an organization’s bank statement, as supplied by the bank, and the corresponding amount shown in the organization’s own accounting records at a particular point in time. The differences may occur, for example, because a cheque or a list of cheques issued by the organization has not been presented to the bank, a banking transaction, such as a credit received, or a charge made by the bank, has not yet been recorded in the organization’s books, or either the bank or the organization itself has made an error. Below Reconciliation example picture is given below. Here you can understand how to do bank reconciliation from this sample. This is not a clear details, it helps you to understand better this concept. Basically Bank reconciliation template helps you to easily create a detailed structure. Excel is a great platform to create this type of statements, Bank Reconciliation Form Excel is a wide chapter. I will write up good tutorials in this blog upcoming weeks. From single Bank Reconciliation Excel Template helps you understand better than other samples.
It may be easy to reconcile the difference by looking at very recent transactions in either the bank statement or the organization’s own accounting records (cash book) and seeing if some combination of them tallies with the difference to be explained. Otherwise it may be necessary to go through and match every single transaction in both sets of records since the last reconciliation, and see what transactions remain unmatched. The necessary adjustments should then be made in the cash book, or any timing differences recorded to assist with future reconciliations. You can find in internet lot of places for Free Bank Reconciliation Worksheet. These Bank Statement Reconciliation Worksheets helps you to easy to manage and calculate.
For this reason, and to minimize the amount of work involved, it is good practice to carry out such reconciliations at reasonably frequent intervals. Reconciliations are generally performed by specialized accounting software though the understanding of what occurs is important for a successful reconciliation. It is prepared on a particular day to reconcile the bank balance as per Cash book or Bank statement showing entries causing difference between the two balances. In case of disagreement in the balance of the cash book and the pass book, the need for preparing Bank Reconciliation Statement arises.
Bank Reconciliation Purpose
After tracing the various items of difference, it is prepared. The following are its advantages in which lies its importance.
- The errors that might have taken place in the cash book in connection with bank transactions can be easily found.
- It prevents frauds as it is prepared regularly.
- It indirectly imposes moral check on the accounting staff.
- Monthly preparation of reconciliation assists in the regular monitoring of cash flows of a business.
- It is processes are most effective when they are consistent and thorough.
Be with reconciliation processes regularly. Changing the reconciliation process often leads to undiscovered inaccuracies and potential fraud. It should be documented clearly to verify that a review has been done. The documentary evidence helps to identify the mistakes. The process and procedures should be documented clearly and communicated. It is useful for financial statement analysis in the business decision making process.
Originally posted 2015-01-29 12:40:01.