Bank Reconciliation Statement as on 31st December 2020

Bank balance as per cash book:
- The bank balance as per the cash book is Rs. 1,98,000.

Bank balance debited by the bank:
- The bank has debited the account with an amount of Rs. 34,000.

Explanation:
When preparing a bank reconciliation statement, it is essential to reconcile the bank balance as per the cash book with the bank statement. This helps to identify any discrepancies and ensure that the records are accurate.

The bank balance as per the cash book is the balance reflected in the company's books of accounts. In this case, the bank balance as per the cash book is Rs. 1,98,000.

However, the bank has debited the account with an amount of Rs. 34,000, which is not recorded in the cash book. This discrepancy needs to be addressed and adjusted in the bank reconciliation statement.

Adjusted bank balance as per the bank statement:
- Bank balance as per cash book: Rs. 1,98,000
- Add: Amount debited by the bank not recorded in cash book: Rs. 34,000
- Adjusted bank balance as per the bank statement: Rs. 2,32,000

Reasons for the discrepancy:
There could be several reasons for the bank debiting the account without the corresponding entry in the cash book. Some possible reasons include:
1. Bank charges: The bank may have deducted charges for services or penalties, resulting in the debit entry.
2. Interest payment: The bank may have credited interest on the account and debited the charges, resulting in a net debit.
3. Errors: It is also possible that there could be errors in recording transactions in either the cash book or the bank statement.

Importance of bank reconciliation:
Bank reconciliation is crucial for several reasons:
1. Ensuring accuracy: By comparing the bank balance as per the cash book with the bank statement, any errors or discrepancies can be identified and rectified promptly.
2. Detecting fraud or unauthorized transactions: Bank reconciliation helps in identifying any fraudulent or unauthorized transactions that may have occurred.
3. Timely recording of transactions: Bank reconciliation ensures that all transactions are recorded accurately and in a timely manner, reducing the chances of missed entries.
4. Budgeting and financial planning: Accurate bank balances help in better budgeting and financial planning, as the company has a clear picture of its available funds.

In conclusion, the bank reconciliation statement as on 31st December 2020 shows an adjusted bank balance of Rs. 2,32,000 after considering the bank debit of Rs. 34,000 not recorded in the cash book. Bank reconciliation is crucial for maintaining accurate financial records and detecting any discrepancies or errors in the bank transactions.