It is not possible to prepare a bank reconciliation statement without adjusting the cash book balance. The purpose of a bank reconciliation statement is to reconcile the differences between the bank balance and the cash book balance. The two balances will rarely match due to various reasons, such as outstanding checks, deposits in transit, bank charges, and interest.
To prepare a bank reconciliation statement, the following steps need to be taken:
Obtain the bank statement for the period under review and compare it with the cash book balance.
Identify any items that appear on the bank statement but not in the cash book, such as bank charges or interest earned. Add these items to the cash book balance.
Identify any items that appear in the cash book but not on the bank statement, such as outstanding checks or deposits in transit. Deduct these items from the cash book balance.
Reconcile any differences between the adjusted cash book balance and the bank statement balance by identifying and explaining any remaining discrepancies.
If the cash book balance is not adjusted, it will not be possible to identify the differences between the two balances and reconcile them. The bank reconciliation statement would, therefore, be incomplete and unreliable, and the cash book balance would not be accurate.
In conclusion, the preparation of a bank reconciliation statement requires the adjustment of the cash book balance to reflect any outstanding items that have not yet cleared in the bank account, such as outstanding checks or deposits in transit.
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