Bank Reconciliation Statement (AGF No. 15)

All the government transactions are done through the bank. All the collection are deposited into the bank and all the payments are made through the bank. Bank provides a Bank pass book and Bank Cash Book is also maintained by the office. Generally, the balance as per pass book and as per bank cash book should be the same, but usually, the two balances do not agree. Therefore, to find out the reasons of difference in the balances in these two books of accounts, a statement is prepared which is known as bank reconciliation statement. Hence, bank reconciliation statement refers to the statement prepared by operating level office to reconcile the balance of bank cash book or pass book. It is known as AGF No. 15.

Objectives of Bank Reconciliation Statement

The following are the main objectives of bank reconciliation statement:

1. To ensures the accuracy of the balances shown by the pass bookand cash book.
2. To provide check on the accuracy of entries made in the both books.
3. To helps to update the cash book by discovering come entries not yet recorded.
4. To help to detect and rectify any errors committed in the book of accounts.
5. To indicate any undue delay in the collection and clearance of cheques.
6. To help in knowing the real bank balance on a given date.

Causes of Disagreement between Balances of Bank Cash Book and Bank Statement

The following are the main causes of disagreement between balances shown by bank cash book and bank statement

1. Cheques and drafts deposited or paid in but not yet collected and credited by the bank.
2. Cheques issued but not yet presented to the bank for payment.
3. The incomes collected and credited in the bank statement but not recorded in the bank cash book.
4. The expenses paid and debited in the bank statement but not recorded in the bank cash book.
5. The wrong amount or entry made in the bank cash book.
6. The wrong amount or entry made in the bank statement.

Ruling or Specimen of Bank Reconciliation Statement

The specimen of Bank Reconciliation Statement is as follows: -

Procedures of Preparing Bank Reconciliation Statement

While preparing bank reconciliation statement, the following procedures should be followed: -

1. State the balance as per bank statement
   The balance shown by the bank statement is recorded on the amount column at first.
2. Add the in-transit deposits
   Sometimes, the cheques and drafts deposited by the office may not be cleared by the bank. In this condition, the balance shown by the bank statement is lower than the balance shown by the bank cash book. Hence, it should be added while preparing the bank reconciliation statement. All the added items are shown in the details column.
3. Obtain total
   The total is obtained by adding the balance as per bank statement to the in-transit deposits.
4. Deduct payments by cheques
   Sometimes, the cheques issued by the office may not be presented in the bank for payment. In this condition, the balance shown by the bank statement is greater than the balance shown by the bank cash book. Hence, it should be deducted while preparing the bank reconciliation statement. All the deducted items are shown in details column.
5. Obtain the actual bank balance
   The actual bank balance as per the bank cash book is determined by deducting the deductible items from the total amount.