Accountancy · Ch 6 — Bank Reconciliation Statement
Introduction
Introduction
Chapter 4 introduced the cash book — a record that serves as both the firm's cash account and its bank account, showing the balance of each at the end of the period. Once the cash book is balanced, the natural next step is to check it against the bank's own records of the firm's transactions.
To do this, the cash book must be fully up to date, and a recent bank statement (or bank passbook) must be obtained. A bank statement is simply a copy of the bank's own record of the firm's account — it lets customers verify their balance and keep their own records current. In a bank statement, every deposit appears in the credit column and every withdrawal in the debit column; if deposits exceed withdrawals the account shows a credit balance, and if withdrawals exceed deposits it shows a debit balance, or overdraft.
In theory, the balance shown in the passbook should match the balance in the cash book exactly. In practice, the two almost never agree on a given date — and figuring out why is exactly what this chapter is about.