Bank Reconciliation Statement

Amongst various ledger accounts maintained by an organization as part of its books of accounts, one of them is bank ledger, also called bank book. Like any other ledger account, it captures entries that affect the bank balance, viz. salaries paid, receipts from debtors etc. 

While the bank ledger records these transactions to show a certain bank balance at the end of the period, the actual bank balance as per bank statement (also called passbook) for the same period may be different. This could happen on account of various reasons, for example, chews issued to vendors for payment but not encashed by them, i.e. not presented for payment. Or cheques received from debtor and captured in accounts but the credit is not reflected in the bank statement as yet. 

These days, with most transactions being NEFT / IMPS and therefore in almost real time, chances of such differences has greatly reduced. However, there could still be some differences, like bank charges levied by the bank which the organization gets to know only once the books are compared with the bank statement.

The process of comparing the bank balance as per books and bank statement and identifying differences is called bank reconciliation, and is usually documented by way of a BRS – Bank Reconciliation Statement.

Typical adjustments seen in a BRS are:


Impact on bank statement

Adjustment to bank book to arrive at balance as per bank statement

1.Cheques issued but not presented for payment by vendorWill inflate balance as per statementAdd to ledger balance
2.Cheques deposited but not clearedWill reduce balance as per statementReduce from ledger balance
3.Bank charges debited by bankWill reduce balance as per statementReduce from ledger balance
4.Interest income credited by bankWill inflate balance as per statementAdd to ledger balance
5.Cheques deposited but returned dishonoredWill reduce balance as per statementReduce from ledger balance
6.Standing instructions for certain payments not captured in booksWill reduce balance as per statementReduce from ledger balance

Depending upon the volume of transactions, businesses may prepare reconciliation more regularly, say weekly or even daily, rather than at the end of accounting year.

For those maintaining accounts in Tally, the process of bank reconciliation gets quite simplified due to the features of Tally. There are options to prepare BRS manually, and also to activate auto preparation. With just a couple of clicks, a user can choose the bank account for which reconciliation needs to be prepared, select the bank statement, and Tally would prepare a BRS automatically by comparing entries in bank book with line items in the bank statement.

To learn about various features of Tally including how to prepare bank reconciliation statement, you could enroll with Super 20 Training Institute which offers some of the best Tally courses in Ahmedabad.