What is Bank Reconciliation Statement ?

Sometimes, Balance amount as per Record maintained by an Account Holder of Bank for a Particular Bank Account shows a mismatch with the Balance as per Bank Statement/Bank Passbook at the end of a Particular date.

Keeping eye on the above matter, Bank Reconciliation Statement is prepared to know the reason of mismatch.

Bank Reconciliation Satement is prepared to know the reason of mismatch between Account Holder's Ledger and Bank Pass Book
So, Bank Reconciliation Statement in Financial Accounting is a statement which gives a complete and satisfactory information about the reason of mismatch between :

  • Ledger/Record maintained by a Business Unit or an Individual for a Particular Bank Account and

  • Bank Statement/Pass Book maintained by the Bank for that Account.

For more understanding on Bank Reconciliation Statement, Let's come to a discussion with an Example.

Mr.Sachin is a Customer of  State Bank of India having Savings Account bearing No-10002000333.

As per Record of Mr.Sachin.

  • Opening Balance as on Date 31/03/2021 is ₹27380.00(Dr.)

Transactions occurred on date 31/03/2021.

  • Cash Deposited into SBI SB A/c No-10002000333 for ₹25600.00

  • Cheque No-201410 for ₹3500.00 issued to S.Kumar.

  • Received from Miss Priya towards consultancy fees for ₹6950.00 through NEFT.

  • Received Cheque No-000111 of HDFC Bank from Dinesh Pandey for ₹2000 and deposited on date 31/03/2021.

Bank Account Ledger as per Account Holder

Closing Balance = Debit Total - Credit Total (₹61930 - ₹3500)

Closing Balance as on date 31/03/2021 is ₹58430 (Dr.)

As per Bank Statement or Bank Passbook.

  • Opening Balance as on Date 31/03/2021 is ₹27380.00(Cr.)

Transactions occurred on date 31/03/2021.

  • Cash Deposited into SBI SB A/c No-10002000333 for ₹25600.00

  • NEFT Credit from Miss Priya towards consultancy fees for ₹6950.00.

Bank Account Balance as per Bank Passbook

Credit Total amount = ₹27380 + ₹25600 + ₹6950 = ₹59930

Closing Balance = Credit Total - Debit Total (₹59930 - 0)

Closing Balance as on date 31/03/2021 ₹59930 (Cr.)

From the above two records i.e Bank Account Ledger as per Account Holder and Bank Account Ledger as per State Bank of India shows a closing balance amount mismatch on date 31/03/2021.

Now it is time to prepare a Bank Reconciliation Statement.

Bank Reconciliation Statement when Closing Balance of Bank Pass Book is taken into consideration at the beginning.

Bank Reconciliation Statement as on date 31/03/2021.

Balance as per Bank Passbook ₹59930.

Add: Deposits not reflected in Bank Passbook ₹2000.

Less: Withdrawals not reflected in Bank Passbook ₹3500.

Balance as per Account Holder's Ledger ₹58430.

Bank Reconciliation statement when Passbook balance is considered at the beginning
Bank Reconciliation Statement when Closing Balance of Account Holder's Ledger is taken into consideration at the beginning.

Bank Reconciliation Statement as on date 31/03/2021.

Balance as per Account Holder's Ledger ₹58430.

Add: Withdrawals not reflected in Bank Passbook ₹3500.

Less: Deposits not reflected in Bank Passbook ₹2000.

Balance as per Bank Passbook ₹59930.

Bank Reconciliation Statement when Account Holder's Balance is considered at the beginning.

Balance as per Account Holder's Ledger is taken into consideration for preparing Balance Sheet of Account Holder.

Location: Cuttack, Odisha, India

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