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).
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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