Bank Reconciliation Statement:

Bank reconciliation allows business enterprise to verify their account records with that of the entries
made by the banker in the passbook. Moreover, bank reconciliation helps identifying the reasons for any
discrepancies in the balances shown by the records and ensures that the balances are agreeing. The
common reasons for disagreement may be cheques issued but not presented for payment, cheques
deposited but the amount is not yet realized, bank charges debited but not intimated, interest credited
on the accumulated balance but not intimated, interest debited on overdraft but not intimated,
payment as per standing instructions by the banker, amounts directly deposited into the bank account
by customers and the like. Therefore, it is necessary on the part of the accountant to reconcile the
statements to ensure the accuracy of accounting record for the convenience of the users. Bank
reconciliation statements are dealt under two circumstances:
1. When balance as per cash book/passbook is taken as basis; and
2. When overdraft balance as per cash book/passbook is taken as the basis.
Steps to be followed while preparing bank reconciliation statement:
1. Choose either passbook balance or cash book balance as the basis
2. Compare the accounting entries in both the records
3. Add or subtract the amount depending on the nature of difference to/from the amount selected
as the basis
4. Compare the resultant figure with the other balance, i.e., if cash book balance is taken as the
basis; compare the result with the passbook and vice versa.
Common Reasons for Discrepancies in Balances:
1. Cheque issued but not presented for payment
2. Cheque deposited but amount not yet realized
3. Bank charges debited but not intimated
4. Interest credited on accumulated balance but not intimated
5. Interest debited on overdraft but not intimated
6. Payment as per standing instructions by the banker
7. Amounts directly deposited into the bank account by customers
Format: (If closing balance of cash book is taken as basis)
Bank Reconciliation Statement Rs.
Balance As per cash book
Add: Cheques issued but not yet presented for payment XXX
Interest Allowed by bank but not recorded in cash book XXX
Income received by bank but not recorded in cash book XXX
Amount deposited by customer directly into bank XXX


Less: Cheques paid into bank but not yet collected by the bank XXX
Bank charges debited in the pass book XXX
Expenses paid directly by bank but not recorded in cash book XXX

Balance as per pass book
XXXXX


XXXXXX
XXXXXX



XXXXXX
XXXXXX

Format: (If closing balance of pass book is taken as basis)
Bank Reconciliation Statement Rs.
Balance As per pass book
Add: Cheques paid into bank but not yet collected by the bank XXX
Bank charges debited in the pass book XXX
Expenses paid directly by bank but not recorded in cash book XXX

Less: Cheques issued but not yet presented for payment XXX
Interest Allowed by bank but not recorded in cash book XXX
Income received by bank but not recorded in cash book XXX
Amount deposited by customer directly into bank XXX

Balance as per cash book
XXXXX


XXXXXX
XXXXXX




XXXXXX
XXXXXX



Example:
From the following particulars prepare a Bank Reconciliation statement showing the balance as per Cash
Book on 31
st
Dec 2007.
1. The following cheques were paid into bank in Dec 2007 but were credited by the bank in Jan
2008: Manhor Rs. 700; Kulwant Rs. 800; Rajinder Rs. 600
2. The following cheques were issued by the firm in December 2007 but were presented for
payment in Jan 2008: Smit Rs. 500; Bharat Rs. 450
3. The following charges were made by the bank which were not recorded in cash book: Bank
charges Rs. 20; Collection charges for outstation cheques Rs. 15
4. The following payments made by the bank direct as per standing instructions and were not
recorded in the cash book: Insurance premium Rs. 350; Subscription for commerce Rs. 75
5. A cheque for Rs. 500 which was received from a customer was entered in the bank column of
Cash book in December 2007 but was omitted to be banked in December 2007.
The Bank balance as per the pass book was Rs. 15,800 on 31
st
Dec 2007, cash book was Rs. 17,910
Example2:
From the following particulars of Reema Traders, prepare a bank reconciliation statement on June 30,
2006
1. Balance as per the cash book Rs.35,750; as per pass book is Rs. 24,450
2. Rs. 250 charges for Credit card fee is debited by bank, which is not recorded in cash book.
3. Cheques for Rs.7,550 are deposited in the bank but not yet collected by the Bank.
4. There was also a debit in the pass book of Rs.3,500 in respect of a discounted bill dishonored.
Example 3:
Bank Pass book of M/S Brham Industries showed a credit balance of Rs.27,350 on July 31,2006.
The following differences were found on that date between the cash book and the pass book:
1. Cheques issued before July 31, 2006, amounting to Rs.19,000 had not been presented for
payment.
2. Two cheques of Rs.5,000 and Rs.3,500 were deposited into bank on July 31, but the bank gives
credit for the same in August.
3. Insurance premium directly paid by bank Rs.5,000.
4. Rs.2,000 wrongly debited to the firm account by the bank.
Prepare Bank Reconciliation Statement as on July 31, 2006 and find out balance as per cash book.


Example 4:
Prepare Bank Reconciliation Statement of M/s Ashima Travels, from the following information:
Bank overdraft as per Cash Book on 31st July, 2006 Rs.45,000; Pass book is Rs. 35,150
Cheques issued but not presented for payment Rs.17,500
Cheques deposited but not yet collected by the bank Rs.9,600
Interest on investment collected by the bank Rs.2,300
Bank charges Rs.350 debited by the bank not yet entered in the cash book.