Question

GIVE 6 EXAMPLES OF THE COMMON ACTIVITIES THAT NECESSITATE BANK RECONCILIATION STATEMENT ?

Answer 1

Bank reconciliation statement is prepared to Max the balances of the bank book and cash book. Following are some of the examples whitch necessitat bank reconciliation statement :

A. Cheque deposited which is In-Transit will not be shown in Bank book but it will show as receipt in our cash book. So there will arise a need of Bank Reconciliation Statement. E.g. ABC deposited $5,000 but this did not appear on the bank statement.

B. Cheque drawn which is In-transit will not be shown as Deduction in bank book but it will show as payment in our Cash book. So there will again arise a need of Bank Reconciliation Statement. E.g. ABC issued checks of $2,000 that have not yet been cleared by the bank.

C. Service fees charged by bank will not be shown in our Cash book but it will only show in Bank book. So to match both the balance again there will be a need of Bank Reconciliation Statement. E.g. Bank statement contains a $20 service charge for operating the account.

D. Bank also pays interest on our balance kept with them. So such amount credited in our bank account will only be shown in Bank book not in our cash book. So again there is need of Bank Reconciliation Statement. E.g. Interest deposited by bank for bank balance after the end of the year.

E. When a customer deposits a check into an account but the account of the issuer of the check has an insufficient amount to pay the check, the bank deducts from the customer’s account the check that was previously credited. The check is then returned to the depositor as an NSF check. So due to NSF cheque there again arises the need of Bank Reconciliation Statement. E.g. A check of $780 deposited by the ABC has been charged back as NSF.

6. Error in Account name also gives a reason to prepare Bank Reconciliation Statement. E.g. A cheque in the name ACB was deposited in the name of ABC.