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Unit-9 Bank Reconciliation Statement

Learn about the causes of this difference and the method of reconciling the balances of these two books.

Explain the procedure for preparing the Bank Reconciliation Statement.




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Learning Pundits Content Team

Written on Jun 25, 2019 3:16:56 PM

When we find a difference between the balance shown by the pass book and the balance as per the cash book, take the following steps to identify the causes of the difference:

i.Compare the items appearing on the debit side of the cash book with those on the credit side of the pass book (deposits column), and place a tick mark against items appearing in both the books.

ii.Compare the items appearing on the credit side of the cash book with those on the debit side of the pass book (withdrawals column), and place a tick mark against items appearing in both the books.

In the process, we will observe that some items remained un-ticked. This means they do not appear in both the books. These will now be considered as those responsible for the difference in the balances of the two books.

After adjusting the un-ticked items in the cash book balance you find that the resultant figure of Rs. 26,470 is the same as the balance as per pass book. If we take the pass book balance as the starting point, you have to follow a similar process. Add the amounts of items which have been responsible for a lower balance in the pass book and deduct those responsible for a higher balance in the pass book. This has been illustrated in the diagram to the right.

The above analysis will help us to prepare a proper Bank Reconciliation Statement. 

List of the items which would generally be added and those which would generally be deducted when cash book balance is used as a starting point.

To be added:

  1. Cheques issued but not yet presented.
  2. Interest allowed by the bank.
  3. Interest and dividends collected but not recorded in the cash book.
  4. Direct deposits by customers in the firm's account in the bank.


To be deducted:

  1. Cheques deposited but not yet collected.
  2. Bank charges.
  3. Interest on overdraft.
  4. Amount paid by a bank under standing instructions but not recorded in the cash book.
  5. Cheques dishonoured but no entry made in the cash book for the dishonour


If the pass book balance is taken as the starting point, just reverse the above process. Add those which are deducted from the cash book balance as given above, and deduct those which are to be added.