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Chapter: 11th Accountancy : Bank Reconciliation Statement

Bank Reconciliation Statement (BRS)

If every entry in the cash book matches with the bank statement, then bank balance will be the same in both the records.

Bank Reconciliation Statement (BRS)

If every entry in the cash book matches with the bank statement, then bank balance will be the same in both the records. But, practically it may not be possible. When the balances do not agree with each other, the need for preparing a statement to explain the causes arises. This statement is called bank reconciliation statement (BRS). The bank reconciliation statement is a statement that reconciles the balance as per the bank column of cash book with the balance as per the bank statement by giving the reasons for such difference along with the amount. As a result of this, internal record of a business (bank column of cash) can be reconciled with external record (bank statement).

 

Need for bank reconciliation statement

It is important to compare the bank statement and bank column of cash book. If the two balances do not match, it is necessary to reconcile them to explain why the differences have occurred. It may be prepared every month, every week or even daily depending on the number of transactions and the needs of the business.




The need for bank reconciliation statement is as follows:


i.            To identify the reasons for the difference between the bank balance as per the cash book and bank balance as per bank statement.

 

ii.            To identify the delay in the clearance of cheques.

 

iii.            To ascertain the correct balance of bank column of cash book.

 

iv.            To discourage the accountants of the business as well as bank from misusing funds.

 

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11th Accountancy : Bank Reconciliation Statement : Bank Reconciliation Statement (BRS) |


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