Concept And Meaning Of Bank Reconciliation Statement

The Best of Brian Tracy
A modern business performs its transactions through bank. It generally receives cash through bank deposits and makes cash payments by issuing cheques. In order to keep records of its transactions, it maintains a cash book with bank columns. It is in fact the bank account in the books of the business. On the other hand, bank also maintains the customer's account in its books. Whenever the business opens an account in the bank by depositing some amount, the bank provides it with a cheque book to facilitate the withdrawal or payment of cash, and a pass book which shows the detailed statement of the customer's account in the bank.

Any transaction that takes place through bank is supposed to be simultaneously recorded in the books. For example, if cash is deposited in the customer's account, it is debited in the bank column of the cash book, while it is credited in the pass book. Similarly, if cash is withdrawn from bank or payment is made through bank, the bank column of the cash book is credited and pass book is debited. As a result, it is supposed that the cash balance at bank shown by both cash book and pass book is always the same. However, the balance shown by the pass book hardly equals the balance shown by the bank column of the cash book.

The disagreement between the balance shown by the pass book and cash book occurs due to some transactions or errors that appear only in the cash book but not in the pass book, or only in the pass book but not in the cash book. However, it is essential to reconcile the difference in the balances shown by the pass book and the cash book for ensuring their accuracy. In order to reconcile the balances shown by them, a statement is prepared which is called bank reconciliation statement. A bank reconciliation statement is the statement which is prepared to reconcile the balances shown by the pass book and cash book by finding the causes of difference between the two balances.

Related Topics
Needs And Importance Of Bank Reconciliation Statement
Reasons For Disagreement Between Cash Book And Pass Book Balances
Preparation Of Bank Reconciliation Statement


  1. Ascent AutoRecon© Banking reconciliation software helps in automatic matching in several areas of bank reconciliation, such as traditional bank reconciliation and reconciliation of foreign currency accounts, direct payments, cash, card terminals (Visa, MasterCard, Eurocard) and bank transfer.


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