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Bank Reconciliation Assignment Help

As we know, cash/bank book* is prepared by an entity whereas passbook is prepared by bank. As both the books are related to one entity and same transactions are recorded in both the books so the balance of both the books should match i.e. the balance as per Pass Book should match to balance at bank as per cash book. But many a times on a given date, these two balances do not match or show the identical amount since any cash or bank transactions are recorded immediately in cash or bank book where as it appears in passbook when it is presented in bank clearing or realization. To reconcile the difference between cash/bank book & pass book, Bank Reconciliation Statement (BRS) is prepared.

Bank reconciliation is a process that explains the difference between the bank balance shown in an entity’s bank statement, as provide by the bank and the corresponding amount shown in the organization's own cash/bank book on a given date.

Reasons for difference: The time period of posting the transactions in the bank column of cash book doesn’t correspond with that of bank pass book. Some of the causes for difference in two balances are illustrated below:-

Sl.CausesCash/Bank Book (Maintained by Entity)Pass Book (Maintained by Bank)
1.Cheques issued but not yet presented for paymentEntry is made. Bank balance decreasedNo entry made till the cheques are presented for payment.
Balance=Same as before
2.Cheques deposited into the bank not yet clearedEntry is made. Bank balance increasedNo entry made till the cheques are cleared.
Balance=Same as before
3.Interest credited by bankNo entry till pass book is checked.
Balance=Same as before
Entry made. Balance increased
4.Bank chargesNo entry till pass book is checked.
Balance=Same as before
Entry Made.Balance decreased
5.Standing instructions for payment to the bank (On due date)No entry till pass book is checked.
Balance=Same as before
Entry Made. Balance decreased
6.Dishonor of bill discountedNo entry till pass book is checked.
Balance=Same as before
Entry Made. Balance decreased

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*Cash/Bank Book is prepared to record all the cash & bank transactions as and when it happens by an entity.
Bank Reconciliation Assignment Help

Need & Importance of Bank Reconciliation:-

i) Preparation of bank reconciliation helps in the identification of errors in the accounting records of the company or the bank.

ii) Bank reconciliation statement may also show any undue delay in the clearance of cheques.

iii) To protect from unauthorized bank withdrawals & to cross verify the amount shown as deposited in entity’s record but never deposited in the bank by any employee of the entity.

iv) If the bank balance appearing in the accounting records can be confirmed to be correct by comparing it with the bank statement balance, it provides added comfort that the bank transactions have been recorded correctly in the company records.

v) Monthly preparation of bank reconciliation assists in the regular monitoring of cash flows of a business.

Procedure for preparation of Bank Reconciliation Statement (BRS):-

Start it with one balance make adjustments and then you will reach to the other balance. This way both the balances will tally. The way the adjustments should be made is illustrated below:

Bank Reconciliation
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