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Preparation of Bank Reconciliation Statement

How to Prepare a Bank Reconciliation Statement (BRS)

A Bank Reconciliation Statement (BRS) is a statement prepared to reconcile the difference between the balance of cash at the bank as per the bank statement (Pass Book) and the balance of cash at the bank as per the company’s cash book. The primary purpose of preparing a BRS is to identify and correct discrepancies between these two records.

FORMAT OF BANK RECONCILIATION STATEMENT:

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Steps to Prepare a Bank Reconciliation Statement

1. Compare Balances:

Start by checking the closing balance of the cash book and the bank statement for the same period. If these balances are not the same, differences need to be identified and adjusted.

2. Identify Unmatched Items:

Look for any items that are present in the cash book but not yet reflected in the bank statement, or vice versa. These can include:

  • Unpresented cheques: Cheques issued by the company that have not yet been cleared by the bank.
  • Uncleared deposits: Amounts deposited in the bank but not yet credited to the company's account by the bank.
  • Bank charges and fees: Charges like service fees or transaction fees that have been debited by the bank but are not yet recorded in the company’s cash book.
  • Direct credits or debits: Automatic payments or receipts, like bank interest or standing orders, that have been processed by the bank but not recorded in the cash book.

3. Adjust the Cash Book Balance:

Once the unmatched items are identified, adjustments need to be made in the cash book to account for any omissions or errors. For example, if bank charges are not recorded in the cash book, they should be debited to reduce the cash book balance.

4. Prepare the Bank Reconciliation Statement:

The BRS is prepared to summarize all the adjustments. The statement starts with the closing balance as per the bank statement or the cash book and lists all items of difference, such as unpresented cheques, uncleared deposits, bank charges, and direct debits or credits. After making these adjustments, the statement should reconcile the two balances, ensuring they match.

5. Investigate and Correct Errors:

If any errors or discrepancies are identified in either the cash book or bank statement, these need to be corrected. Common errors include:

  • Double recording of transactions
  • Omitted entries
  • Misstatements in the amounts

IN THE NEXT SECTION YOU WILL FIND THE DETAILED VIDEOS FOR PREPARING BRS .

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