What is a bank reconciliation statement?

A bank reconciliation statement is a bank statement that is created at the end of the bank reconciliation process. So what is a bank reconciliation? In some cases, a company's cash on hand at the bank and cash on hand do not match for accounting standards. This could be pending checks, deposits that may be on their way to the bank, errors that have occurred, etc. So in such cases, companies need to consider a bank reconciliation process that creates a financial statement, or in other words, a bank reconciliation statement for the difference between the cash on hand in the company's cash account and the outstanding amount on the bank statement.

Some transactions that are only included in the company records and not on the bank statement are listed below:

Deposits in transit

This includes the deposits made by the company that are not received by the bank at the time the account statement is drawn up.

Checks outstanding

These are checks that are issued by the company but have not yet been presented or cashed at the time the account statement is drawn up.

what is bank reconciliation statement

In some cases, the following transactions will only appear on bank statements and not on the company's cash account:

Service fees

These fees are included on the bank statement, but not on the cash account created by the company.

Interest income

This amount is initially recorded on the bank statement as the company does not know the exact amount.

NSF checks

NSF speaks of "insufficient funds". The company will deposit these checks in the bank account but will not be able to claim the money because there is insufficient funds in the account.

Issues related to the bank reconciliation statement

Several issues can be reported when creating the bank reconciliation statement as indicated below:

• Continuous submission of uncleared checks

Occasionally, a significant number of checks may not be presented to the bank for a period of time, or they may not be presented forever in order to make payments. These may be considered unpaid checks for some time, but in the long run it will be necessary to contact the payee to either write new checks or avoid the old checks.

• Checks are released after they have been canceled by the bank

In some situations where the old check is being canceled in order to issue a replacement check, the payee may present the original check to the bank and the bank will definitely reject it. If the check is not canceled at the bank, the check must be credited to the cash account and debited stating the reason for payment (e.g. on a liability account). In any event, if the person does not cash the replacement check, the check must be canceled at the bank to avoid double payment.

cheque_bank reconciliation

• Checks that have been paid in will be returned

There are certain situations where the bank will refuse check deposits as they are being charged to a bank account in another country. In these situations, the posting must be canceled by crediting the cash account to reduce the cash balance with the corresponding debit posting to increase the account for accounts receivable.

Photos by: Peter Baskerville (CC BY-SA 2.0), Bill & Vicki T (CC BY 2.0)

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