Bank reconciliation statement is a report which compares the bank balance as per company's accounting records with the balance stated in the bank statement. It is normal for a company's bank balance as per accounting records to differ from the balance as per bank statement due to timing differences. Certain transactions are recorded by the entity that are updated in the bank's system after a certain time lag. Likewise, some transactions are accounted for in the bank's financial system before the company incorporates them into its own accounting system. Such timing differences appear as reconciling items in the Bank Reconciliation Statement. The purpose of preparing a Bank Reconciliation Statement is to detect any discrepancies between the accounting records of the entity and the bank besides those due to normal timing differences. Such discrepancies might exist due to an error on the part of the company or the bank.

1. Md. Hasan Basri
(Software Consultant)

2. What is a bank reconciliation?
 A bank reconciliation is a process performed by a
company to ensure that the company's records (check
register, general ledger account, balance sheet, etc.)
are correct and that the bank's records are also correct.

3. Reason of Difference
 Cheque issued but not presented for payment.
 Cheque deposited but not cleared.
 Charges debited by bank.
 Interest credited by bank.
 Error made either by bank or the company.

4. Bank Reconciliation Process
 Step 1. Adjusting the Balance per Bank
 Step 2. Adjusting the Balance per Books
 Step 3. Comparing the Adjusted Balances
 Step 4. Preparing Journal Entries

5. Step 1. Adjusting the Balance per Bank

6. Step 2. Adjusting the Balance per Books

7. Step 3. Comparing the Adjusted Balances
After adjusting the balance per bank (Step 1) and after
adjusting the balance per books (Step 2), the two adjusted
amounts should be equal. If they are not equal, you must
repeat the process until the balances are identical. The
balances should be the true, correct amount of cash as of the
date of the bank reconciliation.

8. Step 4. Preparing Journal Entries
Journal entries must be prepared for the adjustments
to the balance per books (Step 2). Adjustments to
increase the cash balance will require a journal entry
that debits Cash and credits another account.
 All items on the book side of the bank reconciliation
require journal entries.
 If the item is added to book side: Debit Cash
 If the item is subtracted from the book side: Credit Cash

9. Adjustment at Journal Sample

10. Sample Exercise: