How to prepare a Bank Reconciliation Statement with Cash Book and Pass Book?

The process of reconciliation ensures the accuracy and validity of financial information. Also, a proper reconciliation process ensures that unauthorized changes have not occurred to transactions during processing. Bank account reconciliation can be manually carried out at a periodic interval when extracts of the Cash Book and updated Pass Book/bank statement are readily available. The frequency of bank reconciliation depends on the company, but they generally reconcile with a bank account at least once a month. Companies with high volumes or those in industries with a high risk of fraud may reconcile more often.

Reconciliation can be done in real time using specialized automation reconciliation software integrated with the Enterprise Resource Planning (ERP) system. ERP integration tools help businesses connect their ERP system with other software applications, databases, and external systems. This integration allows data to be shared and synchronized across different systems. The automated reconciliation software includes a beneficial audit trail.

How to prepare a Bank Reconciliation Statement?

Businesses can utilise a reconciliation statement template which provides a pre-defined structure that includes all the sections and headings required for a comprehensive reconciliation statement. The reconciliation statement of bank statement and cashbook done using the template is used to ensure consistency and accuracy in preparing reconciliation statements. There may be some difference if the uncleared dues like un-presented or un-credited cheques from the previous month. Correct the errors present in the cash book, if any. Tick the columns if you can’t find any errors.

 A reconciliation statement format template characteristically consists of the following sections:

1. Opening Balance: This segment comprises the balance as per the bank statement and the balance as per the cash book at the beginning of the reconciliation period.
2. Transactions Recorded in the Cash Book: This segment consists of all the transactions recorded in the cash book during the reconciliation period. It includes details such as each transaction’s date, description, and amount.
3. Transactions Replicated in the Bank Statement: This segment consists lists of all the transactions reflected in the bank statement during the reconciliation period. It includes details such as each transaction’s date, description, and amount.
4. Adjustments and Discrepancies: This segment accounts for any adjustments or discrepancies between the cash book and the bank statement.
5. Closing Balance: This segment shows the reconciled balance, which is the adjusted balance after considering all the transactions and adjustments made during the reconciliation process.

How to proceed?

Step 1: Compare the credit side of the cash book to the debit side of the bank statement/passbook. The two must be equal in both documents. Tick the columns if you can’t find any errors. Similarly, compare the debit side of the cash book to the credit side of the bank statement/passbook. The two must be equal in both documents. Tick the columns if you can’t find any errors.

Step 2: Enter the ending cash balance per the bank statement.

Subtract outstanding cheques (not yet cleared)

Add deposits in transit (Cheques in hand not yet deposited)

Add bank service fees and other bank transactions not recorded in the cashbook.

Step 3:  Analyse entries in the bank column of the cash book and chequebook. Look for records that have been missed to be posted in the bank column of the cash book.

Step 4: Make a separate list of all such items and list them in the cash book. Make all the final adjustments and check for bank errors in the bank statement and the company’s errors in the cash book.

Step 5: After making adjustments, ensure the results from both documents tally i.e. bank statement and cash book must match with each other.

By using a reconciliation statement template, businesses can save time and effort while ensuring accuracy and consistency.

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