What is a Bank Reconciliation Statement? Meaning, Features, and More.

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In today’s time, banks play a very important role for every organization because with the help of banks, payment can be made to anyone in digital form and payment can be received from anyone, but the other person should also have a bank account. When an account is opened in a bank, the bank maintains the account of its customer and the account holder maintains the account of the bank so that both of them are aware of the transactions taking place in the account at their respective levels.

The bank records all the transactions from its side in its books which can be seen in the passbook or bank statement and the account holder records all the transactions from his side in his books which can be seen in the bank column of the cash book or bank account.

Due to the recording of transactions by both parties on their own behalf, many times the balance in the books of both parties does not match, because the transaction recorded by the bank in its books is not necessarily recorded by the account holder also or the transaction recorded by the account holder in its books is not necessarily recorded by the bank also, this can happen due to many reasons, hence bank reconciliation statement is prepared so that the books of the bank and the account holder can be matched.

What is a Bank Reconciliation Statement?

Bank Reconciliation Statement is a statement used for reconciliation of bank and account holder’s books which is prepared by the account holder, and it is an internal accounting report used by the account holder for his own use. It is prepared in a particular period depending upon the requirement of the account holder. It is prepared in a general format which consists of Particulars, Plus and Minus or Add and Less columns.

Using this, all the reasons are found out due to which the bank and account holder’s books do not match. Generally, date is the most common reason due to which the balances of the books of both the parties do not match because the account holder records the transactions in his books at the time when he does the transaction related to the bank and the bank records the transactions at the time when the transaction actually takes place.

Note: This is not a part of the accounting process.

Features of Bank Reconciliation Statement

Following are the features of bank reconciliation statement:

1. Statement:

This is a statement that the account holder uses to reconcile his books with the bank. With its help, the account holder finds out the reason for the mismatch in his books with the bank. Note that this is not a part of the double entry system, due to which debit and credit are not used in it.

2. For Bank only:

It is used only to match the cash book with the bank book, but other books can also be matched using this concept. Note: It is prepared after the bank book is prepared because in this the cash book is matched with the bank book.

3. Particular Period:

It is prepared in a particular period and this period depends upon the requirement of the account holder. Generally, it is prepared when there is a mismatch between the bank’s book and the account holder’s book but sometimes it is also done to check the accuracy of the cash book like there is no error in debit and credit, there is no arithmetical error or there may be some other reason.

4. Internal Report:

This is an internal report which is used by the account holder for his own use only as it is prepared only to match the cash book with the bank books. In simple words, the account holder does this work for his own convenience and not for outsiders.

5. Helps to Management:

It helps the management in many ways such as it helps in matching the cash book and bank books and if there is any mismatch then it tells the reason for the same, helps in checking the authenticity of the cash book, helps in finding out whether the accounting rules have been properly followed while preparing the cash book or not, etc.

Read Also:

• What is a Cash Book? Meaning, Features, and More.
• Types of Cash Book
• What are Subsidiary Books? Meaning, Features, and More.

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