Bank Reconciliation

8082 WordsJul 14, 201133 Pages
K.M. Khairul Hasan Arif MBA, CMA ( Cont.) Editor Bank Reconciliation What Is Bank Reconciliation? The word “reconciliation” means to make two sets of amounts correspond with each other (i.e. make them equal to each other) by explaining why the two sets of amounts differ. Bank reconciliation is the process of matching and comparing figures from accounting records against those presented on a bank statement. Less any items which have no relation to the bank statement, the balance of the accounting ledger should reconcile (match) to the balance of the bank statement. Bank reconciliation allows companies or individuals to compare their account records to the bank's records of their account balance in order to uncover any possible…show more content…
Consequently, the balance in the pass book will be higher than the balance as per cash book on that date. c) Cheques dishonored but no entry made in the cash book: When cheques are sent to the bank for collection, they are entered in the cash book immediately. But, no entry appears in the pass book till such cheques are actually collected by the bank. Sometimes, for one reason or the other, the cheques deposited for collection get dishonored. The bank returns such cheques to the firm. On receiving the dishonored cheques from the bank, a reverse entry must be passed in the cash book. But, quite often, the firm fails to pass an entry for the dishonor of the cheque, or does so much later. In such a situation, the cash book will be showing a higher balance because no corresponding entry will appear in the pass book. d) Errors in the cash book: It is quite possible that while recording transactions in the cash book some errors have been committed. These errors can be a source of a disagreement between the balances in the two books. Examples of such errors are: i) A transaction, whether on the debit side or on the credit side, recorded more than once. ii) A transaction to be recorded on the debit side has been wrongly recorded on the credit side, or vice versa. iii) Sometimes the firm maintains more than one bank account. It is possible that a cheque issued on one account has been wrongly recorded to the
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