Some of the reasons for a difference between the balance on the bank statement and the balance on the books include: Show
How to Document the DifferencesAny items that are already recorded in the company's general ledger accounts, but have not yet appeared on the bank statement (outstanding checks, deposits in transit), will be noted as an adjustment to the balance per bank statement. Outstanding checks are a deduction to the balance per bank; deposits in transit are an addition to the balance per bank. If an item is on the bank statement but has not yet been entered on the books, the items are noted as an adjustment to the balance per books. Bank service charges, check printing charges, and other electronic deductions that are not yet recorded in the company's accounts will become deductions from the cash balance per the books. Electronic deposits not yet recorded by the company will become additions to the cash balance per books. The bank balance reported by your bank is usually different from the book balance in your accounting records. There are several reasons for this difference, which are as follows:
Documentation of Bank Balance and Book Balance DifferencesWhen any of these differences are listed on the bank statement, they should be recorded on the books of the company, using journal entries. Examples of items to be entered in this way are the interest on deposited cash, bank service fees, check printing charges, and company recordation errors. Generally, firms or customers open a current account with a bank, make transactions, and record it, they maintain a bank column in the cashbook. Bank also opens a separate account for each firm or customer in its ledger and supplies a copy of it to the customer. Sometimes, the entries made in both the passbook and cashbook do not match with each other. Therefore, a statement is prepared to identify reasons for the difference in the balance of both the books and also totally the balances called bank reconciliation statements. The same is duly explained in the 5th chapter of class 11 Accountancy, let us go through the topic and analyze it in detail. This Blog Includes:
What are Bank Reconciliation Statements?A bank reconciliation statement is a financial statement prepared to reconcile the differences in the balance of the bank column of cashbook and passbook by showing all the causes of difference between the two. Purpose of Bank ReconciliationA bank reconciliation is there to compare your records to those of your banks. It checks if there are any two different sets of records for you and the bank in cash transactions. The ending balance of your version will be called the ‘book balance’. The bank’s version for the same is called ‘bank balance’. Requirements to Create BRSA bank reconciliation statement needs the use of both the current and prior month’s statements, as well as the account’s closing balance. Because transactions may still be occurring on the actual statement date, the accountant normally creates the bank reconciliation statement utilizing all transactions from the previous day. Difference Between Bank Statements and Company’s AccountsWhen banks deliver a bank statement to a firm that includes the company’s beginning cash balance, transactions throughout the period, and ending cash balance, the bank’s ending cash balance and the company’s finishing cash balance nearly always disagree. The following are some of the causes behind the disparity:
Important Note: Many businesses now employ specialist accounting software in bank reconciliation to decrease the amount of effort and modifications necessary, as well as to enable real-time updates. Bank Reconciliation Statement ExampleXYZ Company is closing its books and must prepare a bank reconciliation for the following items:
Also Read: Commerce Subjects in Class 11 CBSE: Core & Elective Recording of Transactions in Cashbook and PassbookWhen the money is deposited in the bank, firms enter the transaction on the debit side of the bank column of the cashbook, and at the same time, the bank also counts the same transaction on the credit side of the firm’s accounts maintained with it. On the other hand, when the money is withdrawn from the bank, firms enter the transaction on the credit side of the cashbook. At the same time, the bank enters the transaction on the debit side of the firm’s account with it or in the passbook. Therefore, all the entries recorded on the debit side of the bank column of the cashbook must tally with the entries noted on the credit side of the passbook with the bank. In the same way, all the entries recorded on the credit side of the cashbook must tally with the entries recorded on the debit side of the passbook. Hence, all the entries recorded on the cashbook and passbook must match with each other at any point in time. Must Refer: Class 11 Applications of Computers in Accounting Process of Balancing Cashbook and PassbookOne of the most vital distinctions that students of class 11 studying bank reconciliation statements must be through with is that of cashbook and passbook. Both the terms have their significant meaning under this topic. Let us have a look at their differences-
Also Read: Highest Salary Jobs for Commerce Students Importance of Bank Reconciliation StatementsAs chapter 5th of class 11 accountancy aims to create a solid foundation for the upcoming topics, it is necessary to understand this one in-depth. Here are some simplified pointers that will help you understand the importance of bank reconciliation statements-
Must Read: Stock Trading Courses Steps to Prepare Bank Reconciliation StatementsA bank reconciliation statement is prepared when customers or firms get their passbooks updated from the bank. The customers or firms then tally the entries and balance of both cashbook and passbook. Following steps are required to prepare the bank reconciliation statements: Step 1Tick the items on the debit side of the cashbook which tally with the items on the credit side of the passbook, and note down the unticked items, which is the cause of the difference in balances of both the books Step 2In the same way, tick the items on the credit side of the cash book, which tally with the items on the debit side of the passbook, and note down the unticked items which do not tally in both the books, which is the cause of the difference Step 3Now a bank reconciliation statement can be prepared by taking the balance as per the cash book as a starting point. If the statement is started with the bank column of the cashbook, then the answer arrived will be the balance as per the passbook. Then, you can add the items which have the effect of higher balance in the passbook and deduct the items which influence lower balance in the passbook. Bank Reconciliation Statement FormatBelow we have mentioned the Format for Bank Reconciliation Statement: Credits: Accounting for Management Now that you are through with the process and steps of bank reconciliation statements, let us go through the pointers which elaborate the entries which can be made in the cashbook or passbook. Also Read: How to become a Chartered Accountant? Balance as Per Cashbook can either be Credit or Debit
Balance as Per Passbook can be either Credit or Debit
Bank Reconciliation Statement RulesRules help in avoiding any mistake in the statement. These rules act as a basic framework for the statement. Here are some of the bank reconciliation statement rules:
Bank Reconciliation Statement in TallyCredits: Suman Education Hub Bank Reconciliation Statement Class 11 MCQsMentioned below are the Bank Reconciliation Statement Class 11 MCQs: 1. When a check is not paid by the bank, it is called? A. Honored B. Endorsed C. Dishonored D. a & b 2. A bank reconciliation statement is prepared by? A. banker B. Accountant of the business C. Auditors D. Registrar 3. Bank reconciliation is not a_______? A. Reconcile records B. Memorandum statement C. Ledger account D. Procedure to provide cash book adjustments 4. The balance on the debit side of the bank column of cash book indicates? A. The total amount has drawn from the bank B. Cash at the bank C. The total amount overdraft in the bank D. None of above 5. Bank reconciliation statement is_______? A. Part of bank statement B. Part of the cash book C. A separate statement D. A sub-division of journal 6. Uncollected checks are also known as_______? A. Outstanding checks B. Uncleared checks C. Outstation checks D. Both b & c 7. Unfavorable balance means? A. Credit balance in the cash book B. Credit balance in Bank statement C. Debit balance in the cash book D. Debit balance in the petty cash book 8. Farkhanda Jabeen Ltd. receives a check for Rs. 100 records it in the cash book and deposits it on the same day. A statement sent by the bank that day does not show this Rs. 100. How is this shown on the bank reconciliation statement? A. As an uncredited deposit added to the bank statement balance B. As an uncredited deposit deducted from the bank statement balance C. As an unprecedented check added to the bank statement balance D. As an unprecedented check deducted from the bank statement balance 9. Which of the following items is not a reason for the difference between bank balance as per cash book and passbook? A. Dishonored check B. Cheques deposited but not yet cleared C. Credit sales D. Cheques issued but not yet presented for payment 10. A check that bears a date later than the date of issue is called? A. Anti dated check B. Post-dated check C. Dishonored check D. Outdated check Answers
Refer These: (Bank Reconciliation Statement PDFDownload) (Bank Reconciliation Statement Class 11Download) FAQsWho is responsible for preparing the bank reconciliation statement? A bank reconciliation statement is prepared by business organizations. What is the Bank reconciliation statement definition? A bank reconciliation statement is a financial statement prepared to reconcile the differences in the balance of the bank column of cashbook and passbook by showing all the causes of difference between the two. Is a bank reconciliation statement a comparison report with a bank statement? A bank reconciliation statement compares a bank statement with the balance of the company’s accounts with the balance in the bank statement. Hence, we have presented everything that you must know about the Bank reconciliation statements theory. If you need guidance with career-related queries, then get in touch with the experts of Leverage Edu. Get your free career counselling session through an e-meeting with the team to soar high in your career.
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