Businesses maintain cash books to record both cash as well as bank transactions. Show
A Cashbook has a cash column that shows cash available with the business and a bank column that shows cash at the bank. Bank also keeps an account for every customer in their books. All the deposits are recorded on the credit side of the customer’s account and withdrawals are on the debit side of their account. An account statement is sent regularly to the customers by the bank. Sometimes the bank balances as per the cash book and bank statement doesn’t match. In case the balance available in the passbook doesn’t match the bank column of the cash book, the business should identify the reasons for the same. It is important to reconcile the differences. For reconciling the balances as shown in the Cash Book and passbook a reconciliation statement is prepared known as Bank Reconciliation Statement or BRS. In other words, BRS is a statement that is prepared for reconciling the difference between balances as per the cash book’s bank column and passbook on a given date. Why Prepare a BRS?It‘s not compulsory to prepare a BRS and there’s no fixed date for preparing BRS. BRS is prepared on a periodical basis for checking that bank related transactions are recorded properly in the cash book’s bank column and also by the bank in their books. BRS helps to detect errors in recording transactions and determining the exact bank balance as on a specified date. How to prepare a BRS
Benefits of preparing a BRSAccounting errors could lead to circumstances that are more than just embarrassing when the cheques bounce or companies start getting annoying calls from creditors or suppliers for payments that are already released. Bank reconciliations assist you in spotting fraud and reducing the risk of transactions that could cause penalties and late fees. BRS offers several advantages to a business which includes:
Tips to ensure efficient BRS
File your returns in just 3 minutes 100% pre-fill. No manual data entry What causes the balance on the bank statement to differ?Reasons a Bank Balance Will Differ from a Company's Balance
Outstanding checks. Deposits in transit. Bank service charges and check printing charges. Errors on the company's books.
What are the causes of disagreement between cash book balance and bank statement?The reasons for the difference between the balance on the bank statement and the balance on the books consist of; Outstanding checks. Deposits in transit. Bank service charges.
What items are added to the balance per book on the bank reconciliation?The items that are added to the balance per bank when doing a bank reconciliation include: Deposits in transit which include the cash and checks that were received by a company as of the date of the bank statement, but were not deposited in time for them to appear on the bank statement.
Which of the following items would cause the balance of cash in the bank statement not to equal?Which of the following items would cause the balance of cash in the bank statement not to equal the balance of cash in the accounting records? Cash receipts by the company that have not been deposited in the bank.
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