Explain the steps involved in preparing a bank reconciliation statement

Banking & FinanceFinance ManagementGrowth & Empowerment

Following are the steps involved in preparing bank reconciliation statement (BRS) −

  • Step 1 − Compare the opening balances of cash books and bank statements for any difference. The differences may arise due to uncredited cheques from before. Identify them and tick on bank statements. Now, opening balances are agreed.

  • Step 2 − Now, compare the debit side of the cash book and the debit side of the bank statement and vice versa and tick on items that appear in both cash book and bank statement.

  • Step 3 − Now, check for items that are not ticked on the bank statement (debit side) and enter them in the cash book (credit side of bank column). Hence, they can be ticked off.

  • Step 4 − Now, check for items that are not ticked on the bank statement (credit side) and enter them in the cash book (debit side of bank column). Hence, they can be ticked off.

  • Step 5 − Correct/rectify the errors/mistakes in the cash book (if any).

  • Step 6 − Calculate the revised totals and balances of the cash book (bank column).

  • Step 7 − Now with these updated cash book balance, start preparing bank reconciliation statements.

  • Step 8 − For debit balances in bank reconciliation statements, add unpresented cheques and subtract uncredited cheques. For credit balances in bank reconciliation statements, subtract unpresented cheques and add uncredited cheques.

  • Step 9 − Adjustments are made for bank errors. For debit balances, add amount credited (error by bank) and subtract amount debited (error by bank). For credit balances, subtract the amount credited (error by bank) and add amount debited (error by bank).

  • Step 10 − Final figures should be equal to the balance in the bank statement.

All the above mentioned steps are stated below in a nutshell.


Adjusted cash bookBank reconciliation statement

Debit balance
(adjusted cash book)
Credit balance
(adjusted cash book)
Debit balance
(bank statement)
Credit balance
(bank statement)
Direct depositsDebit


Direct payments
Credit

Uncredited chequesSubtractedAddedSubtractedAdded
Unpresented chequesAdded
Added


raja
Published on 13-Jul-2021 12:15:16
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