Bank Reconciliation Statement

Introduction to Bank Reconciliation Statement

A Bank Reconciliation Statement is a statement prepared by a business to reconcile the difference between the bank balance as per the company's records and the bank balance as per the bank statement. It ensures that both balances are in agreement by comparing the financial transactions recorded by the business with those recorded by the bank.

Debit Balance as per the Bank Statement

When starting with a debit balance as per the bank statement, it means that the bank statement shows a higher balance than the company's records. This can happen due to various reasons such as outstanding checks, deposits in transit, bank errors, or other reconciling items.

Unpresented Cheques

Unpresented cheques refer to checks issued by the company that have not yet been presented to the bank for payment. These checks are recorded in the company's books as payments but have not yet been deducted from the bank balance.

Addition of Unpresented Cheques

To reconcile the difference between the bank balance as per the company's records and the bank statement, the unpresented cheques need to be added to the bank balance as per the bank statement. This adjustment is made because the bank statement does not reflect the deduction of these checks, resulting in a higher balance.

Reasoning behind Adding Unpresented Cheques

The reason for adding the unpresented cheques is to align the bank balance as per the bank statement with the company's records. Since the company has already recorded these checks as payments, they need to be added to the bank balance to reflect the correct position.

Example

Let's say the bank balance as per the bank statement is $10,000, and there are unpresented cheques of $3,000. When preparing the bank reconciliation statement, the unpresented cheques of $3,000 will be added to the bank balance, resulting in a reconciled balance of $13,000.

Conclusion

In conclusion, when starting with a debit balance as per the bank statement, the unpresented cheques should be added to the bank balance to reconcile the difference between the bank balance as per the company's records and the bank statement. This adjustment ensures that both balances are in agreement and reflects the correct financial position of the business.

Debit balance as per bank statement means that it is an bank overdraft and that the cash book would be having a credit balance. When cheque is issued but not presented for payment, the entry for the same would be credited in the cash book and so the cash book negative balance would increase by that much amount.
So while drawing up a bank reconciliation statement, with debit balance as per bank statement, cheque issued but not presented for payment should be added.