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Nov 08 2012

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Steps in Preparing a Bank Reconciliation Statement

bank reconciliation statement, how to prepare bank reconciliation statement, bank pass bookA bank reconciliation statement is a schedule explaining any differences between the balance shown in the bank statement and the balance shown in the depositor’s accounting records.  It is commonly assumed that both the bank and the depositor are maintaining independent records of the deposits, the checks, and the current balance of the bank account. Each month the depositor should prepare a bank reconciliation to verify that these independent sets of records are in agreement. This bank reconciliation statement may disclose internal control failures for example; unauthorized cash disbursements or failures to deposit cash receipts, as well as errors in either the bank statement or the depositor’s accounting records. In addition, the bank reconciliation statement also identifies certain transactions that must be recorded in the depositor’s accounting records and helps to determine the actual amount of cash on deposit. The benefit of reconciling the bank statement is confirming that the amount of cash reported by the  respected company is consistent with the amount of cash shown in the bank’s records.

Steps in Preparing a Bank Reconciliation Statement

The specific steps in preparing a bank reconciling are as follows:

  • Compare deposits listed in the bank statement with the deposits shown in the accounting records. Any deposits not yet recorded by the bank are deposits in transit and should be added to the balance shown in the bank statement.
  • Arrange paid checks in sequence by serial numbers and compare each check with the corresponding entry in the accounting records. Any checks issued but not yet paid by the bank should be listed as outstanding checks to be deducted from the balance reported in the statement.
  • Add to the balance per the depositor’s accounting records any credit memoranda is sued by the bank that have not been recorded by the depositor.
  • Deduct from the balance per the depositor’s records any debit memoranda issued by the bank that have not been recorded by the depositor.
  • Make appropriate adjustments to correct any errors any either the bank statement or the depositor’s accounting records.
  • Determine that the adjusted balance of the bank statement is equal to the adjusted balance in the depositor’s records.
  • Prepare journal entries to record any items in the bank reconciliation listed as adjustments to the balance per the depositor’s records.

Permanent link to this article: http://icabtutorial.com/steps-in-preparing-a-bank-reconciliation-statement/

  • Kevin Woods

    Can anyone help me figure out to complete this task? BANK RECONCILIATION.
    ============================== ================
    On Aug 14th, One of our Partner s ( Compuville ) cash book showed a debit
    balance of $4,000.00.
    His bank statement showed a balance of $4,270.00.
    On comparison the following were found:
    * check issued amounting to $2,500.00 has not been cashed
    * The bank rejected checks amounting to $140
    * Standing order for a staples order of $700 was note noted.
    * A customer paid $170 directly into the bank without any notice to Us
    * Bank charges of $160 were entered in the bank statements only.
    * A dividend of $250 was paid directly into the bank and not recorded in the
    cash
    book
    * Checks for $1,650.00 were entered into the cash book and deposited in the
    bank
    but had not been cleared (deposited).
    Prepare a bank reconciliation statement for the month .
    balance per bank statement
    $ $
    (Add )
    uncredited
    checks
    standing order
    bank charges
    dishonored
    checks
    _____________________
    (Less)
    unrepresented checks
    dividend
    credit
    transfer
    ______________________
    Balance per cash book.

    • imran

      Prepare a bank reconciliation statement for the month .
      balance per bank statement 4270
      $ $
      (Add )
      uncredited 1650
      checks
      standing order 700
      bank charges 160
      dishonored
      checks 140
      _____________________
      (Less)
      unrepresented checks (2500)
      dividend (250)
      credit
      transfer (170)
      ______________________
      Balance per cash book. 4000