Bank Reconciliation Statement Rules

Definition:-  A bank reconciliation statement is a document that matches the cash balance on a company’s balance sheet to the corresponding amount on its bank statement. Reconciling the two accounts helps determine if accounting changes are needed. Bank reconciliations are completed at regular intervals to ensure that the company’s cash records are correct.

Rules in Preparation of Bank Reconciliation Statement

Step 1: Compare the opening balances of both the bank column of the cash book as well as the bank statement. The two can be different in terms of un-cleared dues like un-presented or un-credited cheques from the previous month.

Step 2: Start by comparing the credit side of the bank statement to the debit side of the bank statement. Also, compare the credit side of the cash book to the debit side of the cash book. The two must be equal in both documents. Tick the columns if you can’t find any error.

Step 3: Analyze entries in the bank column of the cash book as well as in checkbook. Look for records that have been missed to be posted in the bank column of the cash book. Make a separate list of all such items and list them in cash book.

Step 4:  Correct the errors present in the cash book, if any.

Step 5: Calculate the balance after revising the updated cash book’s bank column.

Step 6: Prepare Bank Reconciliation Statement accordingly. Make sure to add the updated version of records.

Step 7: Banks are not aware of Un-presented cheques because the beneficiary doesn’t get the cheque. It is the case when the business firm forgets to deliver the signed cheque to the issued name.

This situation leads to the addition of the cheque amount in the bank statement.

On the other hand, cheques which beneficiary has not yet collected are called un-credited cheques. These must be deducted.

Step 8: Make all the final adjustments and check for bank errors in the bank statement and the firm’s errors in the cash book. During heavy transaction days, firms or banks may make mistakes in noting entries.

The process removes those errors. Although it consists of fine work, reconciliation becomes a helping hand at hard times (large transaction days).

Step 9: The results from both the documents i.e. bank statement and cash book must match with each other.