Book-Keeping and Accountancy · Ch 6 — Bank Reconciliation Statement
Preparation of the Bank Reconciliation Statement
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Preparation of the Bank Reconciliation Statement
A Bank Reconciliation Statement can be prepared starting from EITHER balance, to arrive at the other. Whichever balance you start from, the format is the same: a statement (never an account, so it has no Dr./Cr. columns of its own) with a Particulars column and an Amount column carrying a + or − sign (shown here as two separate '(+)'/'(−)' columns), ending in the balance you were asked to find.
Steps to prepare a BRS
- Write the heading: "Bank Reconciliation Statement as on [date]", and state clearly which balance you are starting FROM.
- Enter the opening balance (Cash Book or Pass Book, favourable or overdraft, exactly as given).
- Take up every reconciling item one at a time, decide whether it should be Added or Subtracted using the master rule table below, and enter it.
- Total the additions, total the subtractions, and net them against the opening balance.
- The final figure is the OTHER balance — label it clearly (e.g. "Balance as per Pass Book") and state whether it is a favourable/credit balance or an overdraft/debit balance.
Master rule table — the treatment of every common item, all four starting points
| Reconciling item | From Cash Book (favourable) → Pass Book | From Pass Book (favourable) → Cash Book | From Cash Book (overdraft) → Pass Book | From Pass Book (overdraft) → Cash Book |
|---|---|---|---|---|
| Cheques issued/drawn but not yet presented for payment | Add | Less | Less | Add |
| Cheques/amounts paid into the bank but not yet collected/credited | Less | Add | Add | Less |
| Bank charges, commission or locker rent debited by the bank, not yet in Cash Book | Less | Add | Add | Less |
| Interest allowed by the bank on credit balance, not yet in Cash Book | Add | Less | Less | Add |
| Interest charged by the bank on overdraft, not yet in Cash Book | Less | Add | Add | Less |
| Direct payment made by the bank under standing instruction, not yet in Cash Book | Less | Add | Add | Less |
| Amount directly collected/deposited by the bank (interest, dividend, a bill, or a customer's direct deposit), not yet in Cash Book | Add | Less | Less | Add |
| A deposited cheque later dishonoured, dishonour not yet recorded in Cash Book | Less | Add | Add | Less |