Bank Reconciliation

Statement
Bank reconciliation statement is prepared mainly to
reconcile the difference between the bank balance shown
by the cash book and bank pass book
Different causes of
disagreement
 Cheques issued OR Drawn to creditors but not paid by bank
 Cheques deposited for collection but not yet collected and
credited by the bank
 Amount deposited directly into the bank by the debtors
 Dividend ETC. collected by the bank
 Interest on deposits
 Insurance premium ETC. paid by the bank
 The bank charges ETC. and interest on overdraft
 Errors and Omissions
The Advantages of Bank
Reconciliation Statements

Making mistakes with your accounting can lead to

more than just embarrassing situations when
checks bounce or collection calls are made to
companies that have already paid their bills.
Performing bank reconciliations helps you spot
fraud and reduce the risk of transactions that can
cause late fees and penalties
Different causes of
disagreement
 Pass Book
Pass book is a copy of the depositor`s account in the bank`s
ledger which is provided to the depositor
Distinction Between Cash Book
And Pass Book
Cash Book
 It is written by depositor
 Money deposited is recorded
on the debit side and money
withdrawn on credit side
 A cheque deposited for
collection is recorded on
date of deposit
 A cheque when issued to a
creditor is recorded on date
of issue
 Its debit balance shows cash
at bank and credit balance
shows bank overdraft
Pass Book
 It is written by the bank but
remains in depositor`s
possession
 Money deposited is entered on
the credit side and withdrawn on
the debit side
 It is recorded on the date when
it is actually collected from the
debtor`s bank
 It is recorded when it is paid by
the bank to the creditor
 Its debit balance shows bank
overdraft and credit balance
shows cash at bank
Cash Book
The book in which all cash transactions (either cash is received
or paid) are primarily recorded according to dates is called
Cash Book
Simple OR Single column Cash
Book
Double Column Cash Book

 There are two columns of amount on each side of the cash

book.
Advantages of double column
cash book
 The following advantages are derived from Double Column
Cash Book:
 All entries made in "Bank" Column of Double Column Cash
Book form a part of double entry system and hence a separate
Bank A/C need not be opened in ledger. It saves time, labour
and cost.
 Both cash transactions and bank transactions are recorded in
the same book. So both cash balance and bank balance are
easily available from the same book.
 Thus it is said that the Double Column Cash Book has two
accounts in it, the Cash A/C and the Bank A/C.
CONTRA ENTRY

 A transaction in which Cash A/c and Bank A/c are involved, is

recorded on both the sides of Double Column Cash Book, it is
called "contra entry", from the Latin prefix contra meaning
'opposite to or against'