Bank Reconciliation Statement BRS Format and Steps to Prepare

Match each deposit from the debit side of your record to the credit side on the bank statements while ensuring that the amounts correspond. Reconcile all transactions and ensure that the closing balances match on the balance sheet and the bank statements. Check if the bank deposits and withdrawals match the records on the balance sheet.

First, bank reconciliation statements provide a mechanism of internal control over cash. Similarly, some checks credited to the ledger account will probably not have been processed by the bank prior to the bank statement date. If a bank reconciliation is off by a very small amount, it is usually due to rounding errors.

  • In the case of personal bank accounts, like checking accounts, this is the process of comparing your monthly bank statement against your personal records to make sure they match.
  • The reconciliation of bank statements is a critical step in maintaining accurate financial records for any business.
  • Doing a bank reconciliation is fairly simple, but you need to be diligent in your efforts and avoid skipping steps to ensure the right checks and balances.
  • Reconcile all transactions and ensure that the closing balances match on the balance sheet and the bank statements.
  • If the bank has added legitimate entries, you need to make adjustments in your books so the two reflect the same transactions.
  • This balance exists when the deposits made by your business at your bank are more than the withdrawals.

Performing a regular bank reconciliation enables a business to locate any missing funds, prevent fraud, and verify the cash flow on its balance sheet. The cash account balance in an entity’s financial records may also require adjusting in some specific circumstances, if you find discrepancies with the bank statement. In these cases, journal entries record any adjustment to the book’s balance. After fee and interest adjustments are made, the book balance should equal the ending balance of the bank account. You must post the journal entries of all the adjustments made to the balance as per the cash book.

How to Prepare Bank Reconciliation? A Step-by-Step Guide

They can also be used to identify fraud before serious damage occurs and can prevent errors from compounding. Bank reconciliation statements are tools companies and accountants use to detect errors, omissions, and fraud in a financial account. Bank reconciliation is a simple and invaluable process to help manage cash flows. In other words, the adjusted balance as per the bank must match with the adjusted balance as per the cash book.

First of all, the unrecorded differences are identified and recorded. For example, the bank credited the business account for a transaction that did not relate to the account. Errors are generally rectified promptly if they are caused due to an error in the bank book. Basically, any difference that cannot be justified by either unrecorded differences or timing differences are errors that must be rectified. Since the bank book is an internal document and the bank statement is an external document, there are bound to be differences between the two. Transactions in the bank statement are presented the opposite of transactions in a bank book.

Final Check

The balances will almost always be different and, therefore, the next step is followed. It must ensure that the bank book balance is taken for the last date of the previous month or the month for which the bank statement is considered. Mostly, errors occur in the bank book of the business rather than the bank statements. These errors are then investigated properly to ensure they were not committed intentionally. These differences are adjusted against the bank statement balance but are not recorded in the bank statement. These are differences that will appear in the bank statement after some time, most probably in the next bank statement.

Reasons for Difference Between Bank Statement and Company’s Accounting Record

A BRS checks entries on a monthly basis to avoid any future discrepancy. A BRS means matching records for a cash account entries corresponding to the bank statement. BRS checks the dissimilarity found between the two and makes appropriate changes. In this article, we will discuss the bank reconciliation format and how to prepare it.

What is a bank reconciliation?

So, to reconcile the amounts, you simply add the additions (interest income) and subtract the subtractions (bank charges and overdraft fees) to reach the bank balance. Ideally, the balance in your books is the same as the closing bank balance. Doing a bank reconciliation is fairly simple, but you need to be diligent in your efforts and avoid skipping steps to ensure the right checks and balances. Automating bank reconciliation can reduce the cost of processing and audit costs. It can also save money by keeping a closer eye on the company’s finances and identifying any discrepancies or errors. When done frequently, reconciliation statements help companies identify cash flow errors, present accurate information to investors, and plan and pay taxes correctly.

These differences, as discussed above, will either be due to unrecorded or timing differences. For errors in the bank statement, the bank is contacted and details are given about the transaction. A bank reconciliation can help a company quickly identify fraud as well. TallyPrime also shows you complete detail of any unaccounted transactions, like bank charges or bank interests etc. and help you easily account those transactions from the same screen. This is an important fact because it brings out the status of the bank reconciliation statement. The items therein should be compared to the new bank statement to check if these have since been cleared.

How confident are you in your long term financial plan?

For example, a receipt will be a Debit in the bank book while it will be presented as a Credit in the bank statement. The bank book of the business is an internally prepared document and is prepared by the management of the business, or specifically the accounting department. Uncleared checks are checks that have been sent out but have not cleared the bank yet, which can cause a discrepancy between your records and your bank statement. Generally, these transactions are either recorded on a spreadsheet or within your accounting software. (c) A deposit of $5,000 received by the bank (and entered in the bank statement) on 28 May does not appear in the cash book. Hence, at the end of each month, the first thing to do is to consult the bank reconciliation statement prepared at the end of the previous month.

They can also be helpful when reconciling accounts for pulling reports.Another example would be where you deposit cash, but the teller doesn’t post it correctly. You have to go back and compare your records with the bank’s to try and figure out what went wrong so you can correct your records to match the banks. More importantly, bank reconciliation can play a crucial role how to calculate straight line depreciation formula in catching any fraudulent activity. For example, employees may exploit loopholes in the internal control of a company to their advantage. Therefore, bank reconciliation is the best option that companies have of detecting or sometimes detecting the error before it’s too late. When you record the reconciliation, you only record the change to the balance in your books.


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