Question

Q1-

A. What is a bank reconciliation and why is it important for companies to do it periodically?

B. Prepare a Bank Reconciliation Statement for Rana company that has:

• Bank statement of $8,000.

• Cash account of $7,200.

Additional information for the reconciliation:

• Deposit in transit.
• NSF Check.
• Outstanding check.
• Collections made by the bank.

Required: provide an amount of each information to bring the adjusted balances to be equal.

Answer 1

MEANING

Bank reconciliation statement which reconciles the entity's bank statement with its financial record. It is a statement which is prepared to reconcile the bank balance as per bank statement or bank passbook and bank balance as per financial accounts.

IMPORTANCE

1. Prevention and detection of fraud: By proper reconciliation, an entity can prevent and detect fraud. It ensures whether any unauthorized transfers out of the account, or has anybody made unauthorized withdrawals and whether any unauthorized deposits are made in the bank account.

2. Bank reconciliation statement indicates any undue delay in the collection and clearance of some cheques.

3. Bank Reconciliation Statement helps in identifying the delay reasons for collection and clearance of some cheques.

4. Bank Reconciliation Statement helps in ensuring the accuracy of the balances shown by the pass book and cash book.

RECONCILIATION STATEMENT

PARTICULARS	AMOUNT
BANK BALANCE	8000
ADD: DEPOSIT IN TRANSIT	500
LESS: NSF CHECK	200
LESS: OUTSTANDING CHEQUES	150

LESS: COLLECTION MADE BY BANK	950
BALANCE AS PER CASH BOOK	7200