Bank Reconciliation Statement - Concept, Meaning, Definition and Characteristics
The word "reconcile" means 'to make compatible. It frequently happens in business that two'sets of figures which should agree, for some reason do not. For example, we might estimate that a certain profit should be made in a given period, but in fact we fail to achieve this expected profit. A good accountant would seek to reconcile the two sets of figures, examining the reasons for the discrepancy.
Perhaps the commonest of all such situations is the reconciliation of the Bank Account, as shown in our ledger, with the Bank Account in the Bank's Ledger, as shown when the Bank sends us a Bank Statement.
By reconciliation, the Cash Book balance can be proved by comparing it with the Bank Statement. Bank Reconciliation Statement is an important part of the internal control system over cash balance lying in the Bank.
At present, the major Indian Banks are in the process of switching to a computerized system which is changing the way in which Bank Statements are rendered to customers. However, this is unlikely to affect the need for Bank Reconciliation Statement.
Meaning:
Bank reconciliation Statement is a statement which is prepared to reconcile the balances shown by Cash Book and Pass Books on a particular slate for a stated period. It contains a complete and satisfactory explanation of the difference in balances as per cash book and pass book. It is just a simple procedure to prove the cash book balance is not a part of the book keeping system.
Definitions:
Following are the main definitions of Bank Reconciliation Statement :
According to R.G. Willicyns, "The statement which is prepared to reconcile the balance as expressed by the Bail for the customer and the balance as per Cash Books, called Bank Reconciliation Statement."
According to carter, "It is a statement which is prepared to reconcile the BankBalance shown by Cashbook and the balance shown by Bank Statement."
According to Batlihpi, "A Reconciliation Statement is, therefore, prepared at periodical intervals with a view to indicate the items which cause such agreement between the balance as per the Bank Columns of the Cash Book and the Bank Pass Book on any such date."
Ideal Definition: Bank Reconciliation Statement is a statement which reconciles the balances shown by Cash Book and the Pass Book on any particular date by showing the items of difference between the two accounts.
Characteristics or Features of BRS:
Following are the main characteristics/ features of Bank Reconciliation Statement:
1. It is prepared by the customer (trader), i.e., holder of the account.
2. It Contains a complete and satisfactory explanation of the difference in balances as per the Cash Book and Pass book (Bank Statement).
3. Normally it is prepared on closing date of accounts, i.e., Dec. 31st. Jan. 31 March 31.
4. Sometimes it is prepared at the end of the every month after preparing Cash Book or regularly after certain interval to check the accuracy of Cash Book.
5. It is neither journal liar a Ledger.
6. It is prepared :in a statement faun with the...vertical presentation of facts.
7. It starts with a given balance of any book and ends with balance of other book, e.g., if it starts with Balance as per Cash Book, then ends with Balance as per Pass Book.
8. For arithmetical calculations all the reasons are grouped in 'ADD' and 'LESS' categories respectively.
9. It shows causes of disagreement and amount thereof.
10. It is not legally compulsory to prepare Bank Reconciliation Statement.
11. It shows the bank balance as per Cash Book or Pass Book (Bank Statement) at the end of the period.
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