**Bank Reconciliation Statement**

A bank reconciliation statement is a document that compares the bank balance as per the company's records with the balance reported by the bank. This statement is prepared by businesses to ensure that their records match the bank's records accurately. It helps in identifying any discrepancies, errors, or missing transactions that may have occurred between the company's records and the bank's records.

**Purpose of Bank Reconciliation Statement:**

The primary purpose of a bank reconciliation statement is to ensure the accuracy and reliability of the company's financial records. It serves the following purposes:

1. **Identifying Errors:** The reconciliation process helps in identifying errors that may have occurred in recording transactions, such as duplicate entries, incorrect amounts, or missed transactions.

2. **Detecting Fraud:** By comparing the company's records with the bank's records, any fraudulent activities, such as unauthorized withdrawals or forged checks, can be detected and investigated promptly.

3. **Monitoring Cash Flow:** Bank reconciliation allows businesses to monitor their cash flow effectively. It helps in identifying any discrepancies in deposits or withdrawals, ensuring that the company has an accurate understanding of its available funds.

4. **Maintaining Accuracy:** Reconciling the bank statement on a regular basis helps in maintaining accurate financial records. It ensures that the company's books reflect the correct bank balance and that any discrepancies are resolved promptly.

**Steps in Preparing a Bank Reconciliation Statement:**

The process of preparing a bank reconciliation statement involves the following steps:

1. **Compare Bank Statement:** Obtain the bank statement from the bank and compare it with the company's records. Note down any differences in balances or transactions.

2. **Identify Deposits in Transit:** Identify any deposits made by the company that have not yet been recorded by the bank. These are called "deposits in transit" and should be added to the bank balance.

3. **Identify Outstanding Checks:** Identify any checks issued by the company that have not yet been presented to the bank for payment. These are called "outstanding checks" and should be subtracted from the bank balance.

4. **Add or Subtract Bank Charges:** Take into account any bank charges, such as service fees or interest charges, and adjust the bank balance accordingly.

5. **Account for Errors:** Check for any errors in recording transactions, such as incorrect amounts or duplicate entries. Rectify these errors by adjusting the company's records.

6. **Prepare the Reconciliation Statement:** Finally, prepare the bank reconciliation statement by listing the adjusted cash balance per the company's records and the bank's records. Highlight any differences and investigate the reasons behind them.

**Conclusion:**

A bank reconciliation statement is a vital tool for businesses to ensure the accuracy of their financial records and identify any discrepancies or errors. By regularly reconciling their bank statements, companies can maintain accurate cash balances, detect fraud, and monitor their cash flow effectively. It is essential for businesses to allocate the necessary time and resources to reconcile their bank statements regularly to ensure the integrity of their financial information.

It is a statement which shows the difference between between bank column of cash book and pass book