The preparation of a bank reconciliation statement involves comparing the bank statement balance with the cash book balance and reconciling any differences between the two balances. The purpose of a bank reconciliation statement is to ensure the accuracy of the cash book balance and to identify any discrepancies that need to be resolved. The following steps are involved in preparing a bank reconciliation statement:
Obtain the bank statement for the period under review and compare it with the cash book balance. The cash book balance is the balance of the company's cash account as recorded in its accounting records, while the bank statement balance is the balance of the same account as recorded by the bank.
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. These discrepancies could be caused by timing differences, errors in recording transactions, or bank errors.
Make any necessary adjustments to the cash book balance based on the reconciliation.
Update the company's accounting records to reflect the reconciled balance.
It is important to note that the bank reconciliation statement should be prepared on a regular basis, preferably monthly, to ensure that the cash book balance is always accurate and up-to-date. The bank reconciliation statement serves as a valuable tool for identifying errors and fraud in the accounting records, and for ensuring that the company's cash position is accurately reflected in its financial statements.
Comments
Post a Comment