Question

The preparation of a bank reconciliation is an important cash control procedure. If a company deposits cash receipts daily and makes all cash disbursements by check, explain why the cash balance per books might not agree with the cash balance shown on the bank statement. Identify specific ex

Answer 1

Answer & Explanation :

Bank Reconciliation Statement is prepared to reconcile (match) the differences between bank balance as per cash book & bank balance as per pass book, at end of an accounting period.

The differences may arise because of following reasons :

• Errors committed by firm or bank
• Cheques paid but not collected, upto the last date (added in cash book, but not in bank balance)
• Cheques issued but not yet presented for payment, upto last date (subtracted in cash book, but not in bank balance)
• Direct expenses & direct incomes settled by bank (done in bank balance, but not in cash book)

BRS involves starting with balance as per any book - cash book or passbook. Then, the adjustments for mismatch are done, to arrive at correct balance as per the other book.