Bank Reconciliation Statement: Crack With These Smart Examples
Bank Reconciliation Statement: Crack With These Smart Examples – Learn what a bank reconciliation statement is, explore formats and understand real-world scenarios with clear examples. Whether you're a student, small business owner or accounting enthusiast, this content will walk you through the basics and practical use of a bank reconciliation statement.
You'll learn about different formats, see how to handle common issues like outstanding checks and deposits in transit and practice with real examples and questions that make learning easy. Don’t miss the full guide — it’s your shortcut to mastering bank reconciliation with clarity and confidence!
What is Bank Reconciliation Statement?
Bank Reconciliation Statement (BRS) is a statement that helps match the balance in a company’s cash book with the balance shown in the bank statement (pass book). It is usually prepared at the end of every month to ensure both records are accurate and up to date.
Simply- A Bank Reconciliation Statement is a summary that shows the differences between the bank balance in your books and the actual balance in your bank account.
Why is Bank Reconciliation Important?
- To find errors in recording cheques or deposits
- To detect unrecorded bank charges, interest, or fees
- To identify cheques issued but not yet presented
- To update the cash book properly
- To prevent fraud and maintain accurate financial records
How Often Should You Reconcile Your Bank Account?
The frequency of bank reconciliation depends on the type and size of your financial activity. Here's how you can decide what’s best for you:
- For Individuals and Small Businesses
- If you have simple and low-volume transactions, reconciling your bank account once a month—usually after receiving your monthly bank statement—is often enough. This helps ensure your records match the bank’s, and you can easily catch any small errors.
- For Businesses with High Transaction Volume
- If your business deals with a large number of daily transactions, it's wise to reconcile more frequently, such as weekly or even daily.
Why?
- To track cash flow in real time
- To spot and fix errors quickly
- To avoid accounting problems later
- To maintain financial accuracy for audits or reports
Regular bank reconciliation keeps your financial records accurate, builds trust with stakeholders and helps prevent fraud or costly mistakes.
Whether you choose to do it monthly, weekly or daily, what matters most is consistency and accuracy.
Bank Reconciliation Statement Formats Explained
Bank Reconciliation Statements (BRS) can be prepared in different formats depending on the accounting method or institutional preference. The goal remains the same: to reconcile the difference between the cash book balance and the bank statement (pass book) balance.
Here are the main formats used:
Format 1: Traditional Format (Single Table with Add/Less)
This is the most widely used format. It includes a heading followed by a table with three columns:
Universal Company
Bank Reconciliation Statement
Date: July 31, 2009
| Particulars | Amount (Tk.) | Amount (Tk.) |
|---|---|---|
| Balance as per Pass Book | 5,000.17 | |
| Add: | ||
| Deposit on July 31 after banking hours | 410.90 | |
| 410.90 | ||
| 5,411.07 | ||
| Less: | ||
| Outstanding cheques: | ||
| Cheque No. 881 – Tk. 100.00 | 100.00 | |
| Cheque No. 888 – Tk. 10.25 | 10.25 | |
| Cheque No. 890 – Tk. 402.50 | 402.50 | |
| Cheque No. 891 – Tk. 205.00 | 205.00 | |
| Total Outstanding Cheques | 717.75 | (717.75) |
| 4,693.32 | ||
| ============ | ||
| Balance as per Cash Book | 4,262.83 | |
| Add: | ||
| Collection of note (July 22) | 500.00 | |
| Interest earned (July 31) | 24.74 | |
| 524.74 | ||
| 4,787.57 | ||
| Less: | ||
| Bank charge for note collection (July 22) | 5.00 | |
| NFS / cheque dishonoured (J.B. Ball - July 30) | 50.25 | |
| Bank service charge (July 31) | 12.00 | |
| Cheque No. 875 wrongly recorded (paid 85, recorded 58) | 27.00 | |
| Total deductions | 94.25 | (94.25) |
| 4,693.32 | ||
| ============ |
Final Result: Balance as per Pass Book = Balance as per Cash Book = Tk. 4,693.32
Format 2: Adjusted Cash Book Format + Reconciliation
In this format, you first prepare an Adjusted Cash Book (a mini ledger showing corrections not yet recorded), and then prepare a BRS.
Step 1: Adjusted Cash Book
একটি T-Account Style Ledger, যেখানে থাকে:
- Date
- Particulars
- Amount (Debit Side) = Receipts
- Amount (Credit Side) = Payments
এই অংশে Cash Book সংশোধন করা হয় যেসব item এখনও রেকর্ড হয়নি তা Adjust করে। যেমন:
Adjusted Cash Book (Ledger Format)
| Date | Particulars | Amount (Dr) | Date | Particulars | Amount (Cr) |
|---|---|---|---|---|---|
| Receipt | Payment | ||||
| (i) Cheque cancel | 100.00 | Balance b/d (Overdraft) | 1970.00 | ||
| (a) Overcast | 100.00 | ||||
| (d) Error – wrong discount allowed | 100.00 | ||||
| Balance c/d (Dr) | 2480.00 | ||||
| Total | 2580.00 | Total | 2580.00 |
Mr. Ronak
Bank Reconciliation Statement
As on [Date]
| Particulars | Amount (Tk.) | Amount (Tk.) |
|---|---|---|
| Balance as per Pass Book (Overdraft) | (1650.00) | |
| Add: | ||
| (b) Deposit in transit | 6300.00 | |
| 4650.00 | ||
| Less: | ||
| (c) Outstanding cheques | 5730.00 | |
| (d) Bank error | 2000.00 | |
| (7730.00) | ||
| (2480.00) |
বি.দ্র.: এখানে cash book ও pass book উভয়েই overdraft দেখানো হয়েছে।
Adjusted Cash Book আগে তৈরি করা হয়েছে, এরপর সেটির ভিত্তিতে Bank Reconciliation Statement তৈরি করা হয়েছে।
Common Bank Reconciliation Scenarios Explained With Examples
- Customer directly deposits money into the bank
- Example: A customer directly deposits Tk. 5,000 into your bank account, but you didn’t record it in the Cash Book.
- Action: Add to Cash Book
- Explanation: Since the amount is in the bank but missing in the Cash Book, add it to Cash Book to match both balances.
- Bank collects interest or dividend on your behalf
- Example: The bank collected Tk. 200 dividend from your investment, but you haven’t recorded it yet.
- Action: Add to Cash Book
- Explanation: The bank balance is higher because of this income. To match, you must also show it in the Cash Book.
- Cheque received and deposited but not yet cleared (Deposit in transit)
- Example: You received a cheque of Tk. 1,000 and deposited it on July 31, but the bank didn’t clear it yet.
- Action: Add to Pass Book
- Explanation: Cash Book already has the entry, but the Bank has not cleared it. So, add it to the Pass Book temporarily.
- Cheque received and entered in Cash Book but not sent to bank
- Example: You received Tk. 700 and recorded it in Cash Book, but forgot to deposit it in the bank.
- Action: Add to Pass Book
- Explanation: The Bank hasn’t received the cheque yet, so Pass Book doesn’t show it. Add to match with Cash Book.
- Cash Book undercast (Credit side short by Tk. 200)
- Example: You recorded Tk. 4,000 received but totaled it as Tk. 3,800 in the Cash Book.
- Action: Deduct Tk. 200 from Cash Book
- Explanation: The Cash Book shows more than it should. To fix this error, deduct the missing Tk. 200.
- Bank charges interest twice in the Cash Book (by mistake)
- Example: The bank actually charged Tk. 100 as interest. But you mistakenly recorded Tk. 200 in the credit side of the Cash Book.
- Action: Add Tk. 100 to the Cash Book (debit side)
- Explanation: Since bank charges are always recorded on the credit side of the Cash Book (as money going out), and here you've accidentally written Tk. 200 instead of Tk. 100, your Cash Book now shows Tk. 100 less than actual.
- To fix this mistake, you don’t deduct again — instead, you need to reverse the extra Tk. 100 by entering it on the debit side of the Cash Book.
- This way, you are adding back the wrongly reduced amount — and the corrected Cash Book balance will now match the Bank Statement.
- Cheque recorded twice in Cash Book
- Example: A Tk. 1,200 cheque was mistakenly entered twice in the Cash Book.
- Action: Deduct one entry from Cash Book
- Explanation: Duplicate entries show inflated balance — remove one to correct.
- Bill discounted Dishonored not recorded in cash book
- Example: Tk. 3,000 bill discounted earlier got dishonoured, but you didn’t reverse it in the Cash Book.
- Action: Deduct Tk. 3,000 from Cash Book
- Explanation: The amount isn’t actually received — Cash Book needs to show the loss.
- Cheque issued but not presented (Outstanding cheque)
- Example: You issued a Tk. 2,000 cheque on July 29, but the supplier didn’t deposit it yet.
- Action: Deduct from Pass Book
- Explanation: Cash Book shows less because you issued the cheque, but the Bank still holds the amount. Deduct it from Bank side.
- Cheque deposited but not cleared
- Example: You deposited a Tk. 1,500 cheque, but the bank hasn’t processed it yet.
- Action: Add to Pass Book
- Explanation: Already shown in Cash Book, but not in Bank — so add it temporarily in Bank balance.
- Interest on investment collected by bank
- Example: Bank collected Tk. 400 as interest on fixed deposit.
- Action: Add to Cash Book
- Explanation: This income must be added to Cash Book as it's already in the Bank Statement.
- Bank paid insurance/standing order
- Example: Bank auto-paid your insurance Tk. 800, but not recorded in your books.
- Action: Deduct from Cash Book
- Explanation: Bank balance reduced, so Cash Book must reflect this expense.
- Cheque issued but not presented (repeat for clarity)
- Action: Deduct from Pass Book
- Explanation: Same reason as #9.
- Interest transferred by bank on July 5 but recorded in Cash Book on June 30
- Example: Bank moved Tk. 60 from savings to current account on July 5, but you entered it on June 30.
- Action: Deduct temporarily from Cash Book
- Explanation: Entry mismatch in timing — needs reconciliation until both dates align.
- Discount mistakenly included in bank column of three-column cash book
- Example: You gave Tk. 110 discount but recorded it in bank column instead of discount column.
- Action: Deduct from Cash Book
- Explanation: Bank balance overstated due to wrong column. Correct by deducting from bank side in Cash Book.
- Overdraft Balance at Year-End
- Example: At the year-end on June 30, 2010, Sadik’s cash book showed an overdraft of Tk. 300. That means the balance was on the credit side of the cash book.
- Action: An overdraft means the account holder has withdrawn more than the available balance. In the cash book, this is shown on the credit side (because it's a liability).
Date Particulars Debit (Tk) Credit (Tk) June 30 Balance b/d 300
When and Why Should You Prepare an Adjusted Cash Book for Bank Reconciliation?
An Adjusted Cash Book is a revised version of the regular cash book that includes all missing or previously unrecorded bank transactions before preparing a bank reconciliation statement.
Instead of directly comparing the cash book and the bank statement, we first adjust the cash book for errors or omissions, then compare the updated (adjusted) cash book balance with the pass book (bank statement) to identify remaining differences.
Here are the two most common situations when preparing an adjusted cash book is necessary before bank reconciliation:
1. At the End of the Financial Period (e.g., 31st December or 30th June)
When preparing year-end or half-yearly financial statements, you need the correct cash balance in your books.
Therefore, any unrecorded bank charges, interest, direct deposits, etc., must first be adjusted in the cash book before doing bank reconciliation.
Example
You are closing your accounts on 31st December. The bank has charged Tk. 200 as interest and collected Tk. 500 from a customer directly, both are missing in the cash book.
- You must first update the cash book (adjusted) with these items.
- Then, perform reconciliation using the adjusted cash book balance.
2. When the Problem Mentions Adjusting or Arriving at Correct Cash Book Balance
If the question or scenario includes phrases like:
- "Proceed to a correct cash book balance"
- "Prepare the adjusted cash book first"
- "A statement of adjusted cash book balance"
- "Prepare the bank reconciliation after adjusting cash book"
then you must prepare an adjusted cash book first.
Example from a Question
"Proceeding to a correct cash balance, make the appropriate adjustments in the cash book and prepare a bank reconciliation statement as on 30th June."
This clearly tells you to prepare the adjusted cash book first, then reconcile.
Bank Reconciliation Statement Questions and Answers
1. What are the 4 major parts of bank reconciliation?
The four major parts of a bank reconciliation are:
- Bank Statement Balance
- Cash Book (Ledger) Balance
- Adjustments to the Bank Statement (e.g., deposits in transit, outstanding checks)
- Adjustments to the Cash Book (e.g., bank charges, interest, NSF checks, errors)
2. What is the primary purpose of preparing a bank reconciliation statement?
The primary purpose is to identify and explain the differences between the company’s cash book balance and the bank statement balance, and to ensure the accuracy of both records.
3. What are outstanding checks in a bank reconciliation?
Outstanding checks are checks issued by the company that have been recorded in the cash book but have not yet cleared the bank, meaning they are not yet reflected in the bank statement.
4. What are deposits in transit in a bank reconciliation?
Deposits in transit are amounts received and recorded by the company in the cash book but have not yet appeared on the bank statement because they were deposited too late to be processed within the same period.
5. If the bank makes an error in favor of the depositor (the company), how should this error be treated in the bank reconciliation?
The error should be deducted from the bank statement balance during the reconciliation process, as it caused the bank to overstate the company’s balance.
6. Which side of the reconciliation is impacted by bank service charges that have not yet been recorded in the company's books?
The cash book (company’s books) is impacted. Bank service charges must be deducted from the cash book balance during reconciliation.
7. If a deposit in transit was omitted from the cash book but appears on the bank statement, how should this be treated in the bank reconciliation?
The amount should be added to the cash book balance, because the deposit was made but not yet recorded in the company’s books.
8. If a customer's non-sufficient funds (NSF) check appears on the bank statement but has not been recorded in the cash book, how should this be treated in the bank reconciliation?
The NSF check amount should be deducted from the cash book balance, as the deposit previously recorded is no longer valid.
Final Thought
Mastering the Bank Reconciliation Statement is essential for accurate financial tracking and error-free bookkeeping. By understanding its formats, common scenarios, and practical examples, you’ll be better equipped to handle real-life accounting tasks with confidence. This guide aimed to simplify every part for you.
Have any questions or facing issues with a specific reconciliation or transaction? Drop a comment below — we’re here to help!
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Samreen Info.
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