This is the most important skill required for solving problems involving preparation of the bank reconciliation statement. Reconciling your bank account each month allows you to notice if your financial institution makes a mistake when entering and processing each transaction. (2 Marks) 2. A bank reconciliation compares the bank statement and our company’s records and reconciles or balances to two account balances. 2. There are several reasons for a company to prepare a bank reconciliation: To learn more, see the Related Topics listed below: Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. This is in fact so, but with three important provisos: 1. Why Bank Reconciliation is Important Bank reconciliation is the procedure of comparing and matching figures from the accounting records against those shown on a bank statement. ch_height = "auto"; In the reconciliation statement, your Bank Book entries are compared to the Bank Statement. SOME OF THE ITEMS THAT FREQUENTLY CAUSE A DIFFERENCE:-(i) Cheques issued but not presented for payment: The entry in the cash book is made immediately on Bank Reconciliation Statement. A monthly reconciliation helps you identify any unusual transactions that might be caused by fraud or accounting errors, and the practice can also help you spot inefficiencies. A bank reconciliation statement is the product of reconciliatory process that is performed by an accounting officer in a bid to explain any difference that may exist between a company’s bank statement and its general ledger balance at a particular point in time as per cashbook or bank statement. It has a balance as per Cash Book as on 31stMarch 2019 of $1050. All rights reserved.AccountingCoach® is a registered trademark. 3. ch_width = 200; The result is that any transactions in the accounting records not found on the bank statement are said to be outstanding. Bank interest of $100 was recorded in P… The cash book records all transactions with the bank. also result in disagreement of the two statements. The bank reconciliation statement helps to check the correctness of the entries recorded in the books of accounts and thereby, ensures the accuracy of bank balances. 1. bank-reconciliation-statement Bank Reconciliation Statement Purposes : Here i will explain the term bank reconciliation and state its reasons/ purpose for its preparation. google_ad_height = 600; 6,000 (ii) Interest on overdraft for six months ending March 31 st, 2017 Rs. By reconciling the differences that exist between the two, a Bank Reconciliation Statement helps in arriving at the exact value of the amount of bank balance held on a particular date. To be more precise, these are some of the reasons why we prepare BRS. IMPORTANCE OF BANK RECONCILIATION STATEMENT Bank reconciliation statement is a very important tool for internal control of cash flows. google_color_bg = "FFFFFF"; Overall, the main reason for preparing a bank reconciliation statement(BRS) is to have strict internal control over the company’s cash inflows and outflows. Performing a bank reconciliation results in improved internal … List a few potential advantages, Explain the ROLE AND TASKS of Recruitment Consultant, In an organization, briefly explain the benefits or advantages and disadvantages of decentralization, What are the advantages and disadvantages of using Common Stock Financing from the viewpoint of the Corporation, Accounting Equation & Double Entry System, Accounting Quiz/Test Your Accounting Knowledge, Bad Debt & Allowance For Doubtful Accounts & Provision, Malaysia(n) Financial Reporting Standards, Inspirations/ Motivational Stories/ Quotes. Further details are as follows: 1. ), To monitor “stale” cheques ( those cheques which have not been banked by the payee within the  local banking law of six (6) months, and finally to check on fraud and embezzlement. This offer is not available to existing subscribers. A bank reconciliation is a process of matching the balances in a business’s accounting records to the corresponding information on a bank statement. google_color_link = "5BCAFF"; Even with regular logging of your transactions, you may miss one or enter a number incorrectly in your records. To safeguard the company's cash. It helps in detecting errors, frauds and irregularities occurred, if any, at the time of passing entries in the cash book or in the pass book, whether intentionally or unintentionally. google_ad_type = "text"; Find out which book has a greater balance and which one has a lesser balance Post to the bank account in the relevant book based on what has actually happened. 4. You are already subscribed. Importance of the Bank Reconciliation Statement can be understood with the following points: 1. Bank charges of $50 were recorded in Passbook, but not in Cash Book. A bank reconciliation is used to compare your records to those of your bank, to see if there are any differences between these two sets of records for your cash transactions.The ending balance of your version of the cash records is known as the book balance, while the bank's version is called the bank balance.It is extremely common for there to be differences between the two balances, …
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