Mushtaq Nadeem

Bank Reconciliation Statement

A bank Reconciliation is the process of matching the balances in an entity's accounting records for a cash
account to the corresponding information on a bank statement. The goal of this process is to ascertain the
differences between the two and to book changes to the accounting records as appropriate.

Bank reconciliation statement is a report which compares the bank balance as per company's accounting records
with the balance stated in the bank statement. It is normal for a company's bank balance as per accounting records to differ
from the balance as per bank statement due to timing differences.

A company's cash balance at bank and its cash balance according to its accounting records usually do not
match. This is due to the fact that, at any particular date, checks may be outstanding; deposits may be in transit to the
bank, errors may have occurred etc. Therefore companies have to carry out bank reconciliation process which
prepares a statement accounting for the difference between the cash balance in company's cash account and the cash
balance according to its bank statement.

Following are the transactions which usually appear in company's records but not in the bank statement:
 Deposits in Transit/ Un Collected Cheques/ Un credited Cheques: 

Deposits which have been sent by the company to the bank but have not been received by the bank at proper time
before the issuance of bank statement.
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 Checks Outstanding/ un Presented Cheques:

 Checks which have been issued by the company but were not presented or cleared before the issuance of bank
statement.
Following are the transactions which usually appear in bank statement but not in company's cash account:
 Service Charges: 

Service charges may have been deducted by the bank. Such charges are usually not known to the company before
the issuance of bank statement. Cheque Book Charges, Commission, Interest, bank Charges etc.

 Interest Income/ Dividends ( directly Collected from customers):

 NSF Checks: 

NSF stands for "not sufficient funds". These are the checks deposited by the company in bank account but the bank
is unable to receive payment on those checks due to insufficient funds in the payer's account.

Question -01
1. Bank Balance as per cash Book RS. 50000.
2. Cheques issued but not presented for payments RS.6000.
3. The bank collected dividend Rs. 8000 & credited to bank account.
4. Bank charges were not recorded in cash book Rs. 400.
5. A checque of Rs.4000 deposited but not collected by the bank.

Question -02
1. Bank Balance as per cash Book overdraft RS. 54000.
2. Cheques issued but not presented for payments RS.20000.
3. The bank collected dividend Rs. 8000 & credited to bank account.
4. Bank charges were not recorded in cash book Rs. 100.
5. A checque of Rs.5400 deposited but not collected by the bank.

Question -03
Prepare the BRS for M/S Boss & Co, for the month of May 2004.
1. Bank Balance as per Pass Book RS. 45000.
2. Cheques issued in May RS. 35800 but not presented for payments RS.25940.
3. The bank collected Bills Receivable Rs. 8000 & credited to bank account.
4. Bank deducted Rs.400 as collection Charges.
5. Two checque of Rs.5400 & 2800 deposited but not collected by the bank Rs.2800.

Question -04
Prepare the BRS for M/S Shaza & Co, for the month of March 2016.
1. Bank Balance as per Pass Book Debited RS. 65000.
2. Cheques issued in March
Cheque No. 1216 RS. 3800
Cheque No. 1217 RS. 3500
Cheque No. 1218 RS. 800
but Cheque No. 1217 was not presented for payment.
3. The bank collected Rs. 8000from a customer directly & credited to bank account.
4. Bank deducted Rs.250 as collection Charges.
5. Two checque of Rs.4400 & 2570 deposited but not collected by the bank.
6. Bank Credited Rs.650 as interest income.
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Example
Company A's bank statement dated Dec 31, 2011 shows a balance of $24,594.72. The company's cash records on the
same date show a balance of $23,196.79. Following additional information is available:
1. Following checks issued by the company to its customers are still outstanding:
No. 846 issued on Nov $320.00
29
No. 875 issued on Dec 26 49.21
No. 878 issued on Dec 29 275.00
No. 881 issued on Dec 31 186.50
2. A deposit of $400.00 made on Dec 31 does not appear on bank statement.
3. An NSF check of $850 was returned by the bank with the bank statement.
4. The bank charged $50 as service fee.
5. Interest income earned on the company's average cash balance at bank was $1,237.22.
6. The bank collected a note receivable on behalf of the company. Amount received by the bank on the note
was $550. This includes $50 interest income. The bank charged a collection fee of $10.
7. A deposit of $430 was incorrectly entered as $340 in the company's cash records.
Prepare a bank reconciliation statement using the above information.

Solution:
Company A
Bank Reconciliation
December 31, 2011
 
Balance as per Bank, Dec 31 $24,594.72
Add: Deposit in Transit 400.00
$24,994.72
Less: Outstanding Checks:
No. 846 issued on Nov 29 $320.00
No. 875 issued on Dec 26 49.21
No. 878 issued on Dec 29 275.00
No. 881 issued on Dec 31 186.50
830.71
Adjusted Bank Balance $24,164.01
 
Balance as per Books, Dec 31 $23,196.79
Add:
Interest Income from Bank $1,237.22
Note Receivable Collected by Bank 500.00
Interest Income from Note 50.00
Receivable
Deposit Understated 90.00
1,877.22
$25,074.01
Less:
NSF Check 850.00
Bank Service Fee 50.00
Bank Collection Fee 10.00
910.00
Adjusted Book Balance $24,164.01
Mushtaq Nadeem