Page 174 - DCOM101_FINANCIAL_ACCOUNTING_I

Financial Accounting-I Sukhpreet Kaur, Lovely Professional University

Notes Unit 13: Bank Reconciliation Statement

CONTENTS

Objectives
Introduction
13.1 Purpose of Bank Reconciliation Statement
13.2 Causes of Difference
13.3 Rectification of Errors by Preparing Bank Reconciliation Statement

13.3.1 Reconcile Pass Book through Check Book
13.3.2 Reconcile Check Book through Pass Book
13.4 Summary
13.5 Keywords

13.6 Self Assessment
13.7 Review Questions
13.8 Further Readings

Objectives

After studying this unit, you will be able to:
z Describe the purpose of bank reconciliation statement
z Identify the causes of difference in cash book and pass book

z Realise rectification of errors

Introduction

Business organisations record all the cash and bank transactions in cash book of the company.
The Bank also maintains an account for each customer in its book. A copy of this account is
regularly sent to the customer by the bank which is called ‘Pass Book’ or ’Bank statement’. It
is usually to tally the firm’s bank transactions as recorded by the bank with the cash book but

sometimes the bank balances as shown by the cash book and that shown by the bank statement
do not match. If the balance shown by the pass book is different from the balance shown by bank

column of cash book, the business firm will identify the causes for such difference. It becomes
necessary to reconcile them. To reconcile the balances of Cash Book and Pass Book a statement is
prepared. This statement is called the ‘Bank Reconciliation Statement’.
!

Caution Bank Reconciliation Statement is a statement prepared to reconcile the difference
between the balances as per the bank column of the cash book and pass book on any given
date.

13.1 Purpose of Bank Reconciliation Statement

The reconciliation statement is the most common tool used by organizations for reconciling the
balance as per books of company with the bank statement and is made at the end of every month.

168 LOVELY PROFESSIONAL UNIVERSITY