The bank in its book holds an account for each client and registers all money transfers including deposits and withdraws. Banks offer account statements to customers daily. The balances in the client’s cash book and the bank statement do not always match. If the balance in the passbook does not reflect the balance in the cash book, the company should investigate this.
It is essential to find out the variations. For this, you can prepare a reconciling statement, referred to as a Bank Reconciliation Statement or BRS. It helps you to reconcile the account balances shown in the Cash Book and Passbook. One can opt for the free online bank reconciliation software to prepare the statement.
What do you know about the Bank Reconciliation Statement?
A bank reconciliation statement is an important statement similar to a cash account bank statement. The practice of legitimizing your transaction information with that of your bank is recognized as bank reconciliation. The objective will be to check whether there are any contradictions between your account and the bank’s account. The transaction status must then be corrected, which necessitates changes. This benefits the company in several ways.
Bank Reconciliation records the required changes to proclaim the bank statement and cash book tracks error-free. Furthermore, some discrepancies, such as incorrect data entry, may not be supplanted. All businesses, large and small, must prepare this statement to record and verify the transaction with the bank record. Using the best bank reconciliation tool for small businesses can support them to carry out smooth and errorless business activities.
Appropriate Reasons for Preparing the Bank Reconciliation
Bank reconciliation India delivers you with an all-inclusive view of where your cash is. This encompasses the availability of cash for your use as well as the position of business payment transactions. BRS assists in finding defects in transaction recording and evaluating the accurate bank balance as of a particular date. Here are all the major reasons why you should prepare dependable bank reconciliation.
1. Validating Current Account Balance
Bank reconciliation assists businesses in preventing overdraft charges, unpaid debts, and even bounced cheques. Thus it helps in knowing and validating the current account balance of a business.
2. Defends against deceptive practices
Bank reconciliations India ensures that the total financial amount matches the firm’s transaction information. Deformities can alert businesses to unusual and fraudulent activities. Also, allows them to take action before facing financial losses.
3. Recording Fees and Interest
Banks may charge interest, fees, or penalty charges to your bank statement. You can simply add and minus that amount in your books using month-to-month reconciliations.
4. Discloses Accounting Mishaps
It assists in identifying document errors or manual errors that may jeopardize the business’s reporting. Thus, it helps to prevent possible legal and strategic difficulties.
5. Knowing the Differences between Firms’ and Bank’s Balances
It helps in identifying the discrepancies between both the firm’s and the bank’s registers. Moreover, any mistakes made whether by the firm or bank should be detected and resolved.
Role of Easy GST in Bank Reconciliation
Easy GST is accounting software that is available for free. It is the best billing software, providing enhanced accounting and inventory management services. Also, it is one of the best free online bank reconciliation software that monitors all the bank statements and maintains them as per the latest standards. Linking the bank accounts to Easy GST proves to be beneficial for an organization. It monitors all the transactions of your bank statements and makes it handy for keeping your financial records up to date and correct.
How to Establish a Bank Reconciliation Statement
It is easier to use the top bank reconciliation software to prepare a uniform statement for your business. Since every business and enterprise have their own needs and requirements, they need to prepare their statements accordingly. In case, you are running a small-sized business or a startup, you can also rely on the best bank reconciliation tool for small business.
Different people have their several perceptions about bank reconciliation statement. Some people believe that it should be done every day whereas others argue that it should be performed at least once per month. The method is usually consistent, irrespective of the rate at which you execute the reconciliation.
Essential Steps to Prepare BRS
Following are the necessary steps to prepare BRS.
- To begin, evaluate the initial balances of the cash book’s bank column and the bank statement. In aspects of unpaid dues from the prior month, such as un-credited cheques, the two can be quite different.
- Match the credit and debit sides of the cash book bank column and the bank statement. Mark all of the elements that appear in both records with a checkmark.
- Examine the records in both the records for transactions that should have been put in the bank column of the cash book but were not. Make a list of these transactions and make the required changes to the cash book.
- Once matched, rectify the mistakes from the cash book and revise the transactions.
- Next, begin with preparing the bank reconciliation statement by updating the cash book balance.
- Then, add the deposits presently in progress from your organization to the bank and remove cheques or cash that haven’t passed the bank.
- Following that, examine the business’ ending balance and deduct any bank fees or interest received.
- Lastly, analyze and compare the balances of both the bank and business. If they’re not the same, there’s an accounting mismatch that takes a gander into.
Follow all the above steps to get effective results. Bank reconciliations aid in the detection of fraudulent activities and the lower risk of transactions resulting in fines and late payments.
Conclusion
This article has surely helped you to know the methods and steps of preparing an effective bank reconciliation statement. A high amount of losses in business forces them to disperse. However, BRS helps in knowing the inaccuracies and maintains a healthy track of all the transactions. Also, it helps in identifying all the transactions that were missed in the transaction history. Businesses can also take the help of top bank reconciliation software to enhance their business productivity and entail efficient performance.
