Bank Reconciliation Statement
Enterprises record transactions with the bank in the bank column of the cash book similarly Bank also transactions in its ledger book which are supplied to customers by the bank in the form pass book. Though both accounts show information about similar parties however due to certain reason bank column of cash book does not tallies with bank pass book. So, Bank reconciliation statement is prepared for locating at the causes and amount of difference between the two, if any.
TYPES OF BANK ACCOUNTS
CURRENT ACCOUNT: Current Account is an account in which money can be deposited as often as desired by the account holder and can be withdrawn without notice as often as necessary. This kind of accounts is owned by the people engaged in business activities as it allows frequent transactions.
SAVINGS ACCOUNT: Saving Account is an account in which money can be depoisted as often as required but there are certain restrictions on the number of transaction and there may be restrictions on the amount of withdrawals that can be made.
FIXED DEPOSIT: Account in which money is deposited only and cannot be withdrawn before the expiry of that period for which it is made.
RECURRING DEPOSITS ACCOUNT (RD): In Recurring Deposit Account money is deposited monthly & withdrawn after the expiry of fixed tenure. There is a fixed amount that must be deposited monthly.
CASUSES OF DIFFERENCE BETWEEN BANK BALANCE SHOWN BY CASH BOOK AND PASS BOOK
• Cheques issued but not presented for payment
• Cheques deposited for collection but not yet collected
• Bank charges not entered in the cash book
• Interest credited or debited by bank, not entered in the cash book
• Direct collections on behalf of customers
• Direct payment by bank
• Cheques received and entered in the cash book but omitted to be deposited into the bank
NEED AND IMPORTANCE OF BRS
1. By BRS the customer becomes sure of the correctness of the bank balance shown by the Cash Book and the pass book. It helps bank account holder in making the further transactions with the bank.
2. BRS helps in locating the errors or omissions that may have been committed either on the part of the customer himself or by the bank. The errors so detected can be rectified accordingly.
3. BRS facilitates the preparation of a revised Cash Book.
Balance is said to be favourable when client has amount deposited in bank.
Cash Book will Show Dr. Balance
Pass Book will show Cr. Balance.
Balance is said to be favourable when client has availed Bank Overdraft from Bank.
Cash Book will Show Cr.. Balance
Pass Book will show Dr. Balance
These online MCQ Mock tests and MCQ questions includes all main concepts of the chapter (Bank Reconciliation Statement ) in CS foundation Financial Accounting and Auditing.