Page 97 - ISCDEBK-XI

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C H A P T E R

Bank Reconciliation Statement

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Bank Reconciliation Bank Reconciliation Statement is a statement prepared on a
Statement particular day to reconcile the bank balance as per Cash Book with
the balance as per Bank Pass Book or Bank Statement showing entries
causing difference between the two balances.
2. Bank Pass Book or Bank Pass Book or Bank Statement is a copy of account of the
Bank Statement account holder in the books of the bank.
3. Favourable or Debit It means surplus amount lying deposited with the bank. It is the
Balance as per Cash Book difference between debit side and credit side of the bank column of the
Cash Book, debit side being bigger.
4. Favourable or Credit It means surplus amount lying deposited with the bank. It is the
Balance as per Pass Book difference between credit side and debit side of the Bank Pass
or Bank Statement Book or Bank Statement, credit side being bigger.
5. Unfavourable or Credit It means amount overdrawn, i.e., drawn in excess of deposits. It is
Balance as per Cash Book the difference between credit side and debit side of the bank column of
the Cash Book, credit side being bigger.
6. Unfavourable or Debit It means amount overdrawn, i.e., drawn in excess of deposits. It is
Balance as per Bank Pass the difference between debit side and credit side of the Bank Pass
Book or Bank Statement Book or Bank Statement, debit side being bigger.
7. Overdraft A situation when the account holder withdraws more money from the
bank than the amount available in his/her account.
8. Corrected or Amended As a result of bank reconciliation, entries may have to be passed in
Cash Book the Cash Book. The Cash Book after recording such entries is known as
Corrected or Amended Cash Book.

CHAPTER SUMMARY

• Bank Reconciliation Statement is a statement prepared on a particular date reconciling the bank balance in
the Cash Book with the balance as per the Bank Pass Book or Bank Statement showing the causes of difference
between the two balances.
• Reasons or Causes of Difference can be as follows:
(i) Cheques issued but not yet presented for payment;
(ii) Cheques deposited but not yet cleared;
(iii) Interest allowed (credited) by the bank;
(iv) Interest and expenses charged by the bank;
(v) Interest and dividends collected by the bank;
(vi) Direct payments by the bank;
(vii) Direct payments into the bank by customer;
(viii) Dishonour of bills discounted with the bank;