Q.Give any three reasons for preparing bank reconciliation statement.

A BRS is prepared to reconcile the cash book and pass book balances, locate the reasons for the difference and detect errors/frauds (any three).

The balance shown by the cash book (bank column) and by the pass book on a particular date usually differ. A Bank Reconciliation Statement (BRS) is prepared to reconcile them. The reasons/needs for preparing it include (any three for full marks):

1. To locate the causes of difference — it explains why the cash book and pass book balances differ (cheques not yet collected or presented, bank charges, direct payments, etc.).

2. To detect errors and omissions — errors committed either in the cash book by the business or in the pass book by the bank can be identified and corrected.

3. To detect delay and fraud — undue delay in collecting or clearing cheques, and any misappropriation, can be revealed.

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