PPT : Bank Reconciliation Statement | Accountancy Class 11 - Commerce PDF Download

 Page 1


Bank Reconciliation 
Statements
Page 2


Bank Reconciliation 
Statements
Overview
Cash Book Records
Businesses record 
cash and bank 
transactions in a cash 
book, which serves 
as both cash account 
and bank account, 
showing balances at 
period end.
Bank Statement
A bank statement or 
passbook shows the 
bank's record of an 
account, enabling 
customers to check 
funds and update 
their transaction 
records.
Reconciliation Need
The cash book and bank statement balances 
often differ, requiring reconciliation to identify and 
explain these differences.
In a bank statement, deposits appear in the credit 
column while withdrawals show in the debit column. A 
credit balance indicates deposits exceed withdrawals, 
while a debit balance (overdraft) means withdrawals 
exceed deposits.
Page 3


Bank Reconciliation 
Statements
Overview
Cash Book Records
Businesses record 
cash and bank 
transactions in a cash 
book, which serves 
as both cash account 
and bank account, 
showing balances at 
period end.
Bank Statement
A bank statement or 
passbook shows the 
bank's record of an 
account, enabling 
customers to check 
funds and update 
their transaction 
records.
Reconciliation Need
The cash book and bank statement balances 
often differ, requiring reconciliation to identify and 
explain these differences.
In a bank statement, deposits appear in the credit 
column while withdrawals show in the debit column. A 
credit balance indicates deposits exceed withdrawals, 
while a debit balance (overdraft) means withdrawals 
exceed deposits.
Need for Reconciliation
Purpose
Bank reconciliation 
statements are needed 
because the bank balance in 
a firm's cash book rarely 
matches the balance shown 
in the bank statement. This 
statement helps reconcile 
(tally) these two balances by 
identifying and explaining 
the differences.
Requirements
To prepare a reconciliation 
statement, you need both 
the cash book balance and 
bank statement as of a 
particular date. By 
comparing entries in both 
records, you can identify the 
items causing discrepancies 
and their amounts.
Causes of Differences
The differences between 
cash book and bank 
statement balances typically 
arise from timing differences 
in recording transactions 
and errors made either by 
the business or the bank.
Page 4


Bank Reconciliation 
Statements
Overview
Cash Book Records
Businesses record 
cash and bank 
transactions in a cash 
book, which serves 
as both cash account 
and bank account, 
showing balances at 
period end.
Bank Statement
A bank statement or 
passbook shows the 
bank's record of an 
account, enabling 
customers to check 
funds and update 
their transaction 
records.
Reconciliation Need
The cash book and bank statement balances 
often differ, requiring reconciliation to identify and 
explain these differences.
In a bank statement, deposits appear in the credit 
column while withdrawals show in the debit column. A 
credit balance indicates deposits exceed withdrawals, 
while a debit balance (overdraft) means withdrawals 
exceed deposits.
Need for Reconciliation
Purpose
Bank reconciliation 
statements are needed 
because the bank balance in 
a firm's cash book rarely 
matches the balance shown 
in the bank statement. This 
statement helps reconcile 
(tally) these two balances by 
identifying and explaining 
the differences.
Requirements
To prepare a reconciliation 
statement, you need both 
the cash book balance and 
bank statement as of a 
particular date. By 
comparing entries in both 
records, you can identify the 
items causing discrepancies 
and their amounts.
Causes of Differences
The differences between 
cash book and bank 
statement balances typically 
arise from timing differences 
in recording transactions 
and errors made either by 
the business or the bank.
Timing Differences
Time Gap in Recording
When a business compares 
its cash book balance with the 
bank statement balance, 
differences often arise due to 
time gaps in recording 
transactions related to 
payments or receipts.
Transaction Timing
The business and bank may 
record the same transaction 
on different dates, creating 
temporary discrepancies 
between the two records that 
need reconciliation.
Reconciliation Period
These timing differences are 
normal and expected, making 
regular bank reconciliation an 
essential accounting practice 
to ensure accuracy of 
financial records.
Page 5


Bank Reconciliation 
Statements
Overview
Cash Book Records
Businesses record 
cash and bank 
transactions in a cash 
book, which serves 
as both cash account 
and bank account, 
showing balances at 
period end.
Bank Statement
A bank statement or 
passbook shows the 
bank's record of an 
account, enabling 
customers to check 
funds and update 
their transaction 
records.
Reconciliation Need
The cash book and bank statement balances 
often differ, requiring reconciliation to identify and 
explain these differences.
In a bank statement, deposits appear in the credit 
column while withdrawals show in the debit column. A 
credit balance indicates deposits exceed withdrawals, 
while a debit balance (overdraft) means withdrawals 
exceed deposits.
Need for Reconciliation
Purpose
Bank reconciliation 
statements are needed 
because the bank balance in 
a firm's cash book rarely 
matches the balance shown 
in the bank statement. This 
statement helps reconcile 
(tally) these two balances by 
identifying and explaining 
the differences.
Requirements
To prepare a reconciliation 
statement, you need both 
the cash book balance and 
bank statement as of a 
particular date. By 
comparing entries in both 
records, you can identify the 
items causing discrepancies 
and their amounts.
Causes of Differences
The differences between 
cash book and bank 
statement balances typically 
arise from timing differences 
in recording transactions 
and errors made either by 
the business or the bank.
Timing Differences
Time Gap in Recording
When a business compares 
its cash book balance with the 
bank statement balance, 
differences often arise due to 
time gaps in recording 
transactions related to 
payments or receipts.
Transaction Timing
The business and bank may 
record the same transaction 
on different dates, creating 
temporary discrepancies 
between the two records that 
need reconciliation.
Reconciliation Period
These timing differences are 
normal and expected, making 
regular bank reconciliation an 
essential accounting practice 
to ensure accuracy of 
financial records.
Factors Affecting Time Gap (Part I)
1
Cheques Issued But Not 
Presented
When a firm issues 
cheques to suppliers or 
creditors, they 
immediately record this in 
the cash book. However, 
the bank only debits the 
firm's account when 
these cheques are 
actually presented and 
paid, creating a time lag.
2
Cheques Deposited But 
Not Collected
Cheques received from 
customers are 
immediately recorded in 
the cash book, but the 
bank only credits the 
account when the 
amounts are actually 
realised, which may take 
several days, especially 
for outstation cheques.
3
Direct Debits by Bank
Banks sometimes deduct 
amounts for various 
services without the 
firm's immediate 
knowledge, such as 
collection charges, 
incidental charges, 
interest on overdraft, or 
bounced cheques, 
reducing the bank 
statement balance.