How to Prepare a Bank Reconciliation Statement:

Only available on StudyMode
  • Download(s) : 121
  • Published : November 16, 2011
Open Document
Text Preview
How to Prepare a Bank Reconciliation Statement:
To prepare the bank reconciliation statement, the following rules may be useful for the students: 1. Check the cash book receipts and payments against the bank statement. 2. Items not ticked on either side of the cash book will represent those which have not yet passed through the bank statement. 3. Make a list of these items.

4. Items not ticked on either side of the bank statement will represent those which have not yet been passed through the cash book. 5. Make a list of these items.
6. Adjust the cash book by recording therein those items which do not appear in it but which are found in the bank statement, thus computing the correct balance of the cash book. 7. Prepare the bank reconciliation statement reconciling the bank statement balance with the correct cash book balance in either of the following two ways:

(i)  First method (Starting with the cash book balance) (ii) Second method (Starting with the bank statement balance)

First Method (Starting With the Cash Book Balance):

|(a) |If the cash balance is a debit balance, deduct from it all cheques, drafts etc., paid into the bank but not collected | | |and credited by the bank and added to it all cheques drawn on the bank but not yet presented for payment. The new | | |balance will agree with bank statement. | |(b) |If the bank balance of the cash book is a credit balance (overdraft), add to it all cheques, drafts, etc., paid into the| | |bank but not collected by the bank and deduct from it all cheques drawn on the bank but not yet presented for payment. | | |The new balance will then agree with the balance of the bank statement. |

Second Method (Starting With the Bank Statement Balance):

|(a) |If the bank statement balance is a debit balance (an overdraft), deduct from it all cheques, drafts, etc., paid into | | |bank but not collected and credited by the bank and add to it all cheques drawn on the bank but not yet presented for | | |payment. The new balance will then be agree with the balance of the cash book. | |(b) |If the bank statement balance is a credit balance (in favor of the depositor), add to it all cheques, drafts, etc., paid| | |into the bank but not collected and credited by the bank and deduct from it all cheques drawn on the bank but not yet | | |presented for payment. The new balance will agree with the balance of the cash book. |

Alternatively:

|Information |Cash book shows debit balance i.e., |Cash book shows credit balance | | |bank statement shows credit balance |i.e., bank statement shows debit | | | |balance | | |CB to BS |BS to CB |CB to BS |BS to CB | |Cheques issued but not presented in the bank |Add |Less |Less |Add | |Cheques paid into bank but not collected and |Less |Add |Add |Less | |credited by the bank | | | | | |Credit, if any in the bank statement |Add |Less |Less |Add | |Debit, if any in the bank statement |less |Add |Add |Less |

Example 1:

On December 31 1991 the balance of the cash at bank as shown by the cash book of a trader was $1,401 and the balance as...
tracking img