Bank a/c balance as per Cash Book & Pass Book :: Difference - Reconciliation

... From Page 4

Reconciling the Bank a/c

Reconcile = To bring (something) into a state of agreement or accord.
Getting two things to correspond
Make compatible with
Accept as inevitable
To reconcile does not mean to adjust or to rectify.

Reconciling a bank account implies ensuring that the bank account balance as per the Cash Book and the Bank book is agreeing after taking into consideration all the reasons for the difference in the balance.

In reconciling the bank balance, we consider the balance either as per the Cash Book or the Bank Pass Book and make adjustments to the same to account for the difference in the books and thereby check whether we get the balance as per the other book or not.

If after taking into consideration all the reasons for the difference in balances as shown by both the books and making adjustments to the balance as shown by one of the books, we arrive at the balance as per the other book, then we assure ourselves that the balance as revealed by both the books is correct.

Balance shown in the Balance Sheet?

The balance sheet of any organisation is a statement of ledger account balances which have not been closed (Personal a/c's, Real a/c's and some Nominal a/c's) and have been transfered to the next accounting periods.

The Balance Sheet of the organisation contains the ledger account balances in its books. Therefore, the Bank a/c balance as shown by the Cash Book should appear in the balance sheet. The Reconciliation statement is an additional statement that is prepared for some purpose (to explain the reasons for difference in balance as shown by the cash book and pass book) and not for adjusting the figure in the balance sheet or the ledger account.

If we consider the Balance sheet of the bank, they would consider the balance as shown by the pass book to be presented in the balance sheet.

When is BRS prepared?

Bank Reconciliation Statement (BRS) is prepared as and when needed. The need for preparation of BRS arises only when there is a difference in the bank a/c balance as revealed by the Cash Book and the Bank Pass Book. In simple terms BRS can be taken to be a statement that explains the difference.

Generally we prepare a BRS at the end of the accounting period, to explain the difference between the Bank a/c balance as shown in the Balance Sheet and the balance as revealed by the pass book.

Simple Example

Considering the example in the previous pages, BRS for some days on which there is a difference in bank account balance.

Note:

The BRS is required to be prepared only when there is a difference in the bank account balance as revealed by the Cash Book and the Pass Book. It is prepared on a particular day taking into account the reasons for difference.

The number of examples on various days is given to enable understanding. Genreally BRS is prepared on the last day of the accounting period to explain the difference between the Bank a/c balance that is shown in the B/S and the pass book balance as on the last day of the accounting period.

Author Credit : The Edifier ... Continued Page 6

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