What is Bank Reconciliation Statement?
in simple term, it is a Statement that shows the reconciliation of Balance in the Bank Statement with the Balance in the Cash Book on a specific date. This date is usually the month-end date.
Here goes an example of a Test Bank Account
1. Test Bank is a newly opened bank in SGD with no brought forward balance from previous month. Its first bank transaction is in Jan 2020
2. During the month Jan 2020, the bank transactions in accounts book were as follows :
item (1) Total Credited in Test Bank $1,800 (Payments) which consisted of 4 transactions
Item (2) Total Debited in Test Bank $52,500 (Receipts) which consisted of 5 transactions
Item (3) Total Net Changes in Test Bank (Balance as per Cash Book) $50,700 which was $52,500 les $1,800
Item (4) Total Balance as per Bank Statement was $9,500. On 31 Jan 2020, only 2 transactions were cleared by the bank => 3 Jan 2020 Receipts $10,000 and 21 Jan 2020 Payments $500.
At above Point 2, no bank reconciliation was done yet at this point and it looks as follows (before reconciliation starts):
3. On 31 Jan 2020, click "tick" on the 2 reconciled transactions cleared by Test Bank
4. After reconciliation, it will look like this :
The field "Balance against Net Outstanding Transaction" will be zeroed off. If the reconciliation is not completely done up, there will be a outstanding balance in the field.