Bank Reconciliation Statement — Account STD 11 Commerce — Question

Bank Reconciliation Statement is a statement prepared by the account holder on a particular date to reconcile the bank balance as per Cash Book with the balance as per Bank Statement or Bank Pass Book showing entries because of which differences between the two balances exist.
By Patil- "Bank reconciliation statement is a statement prepared mainly to reconcile the difference between the Bank Balance shown by the Cash Book and Bank Pass Book.''
Need and Importance of Bank Reconciliation Statement
It is essential to prepare a bank reconciliation statement due to the following reasons:

1. A bank reconciliation statement locates the errors or omissions that may have been committed either on the part of the customer or the bank. The errors so detected can be rectified accordingly.
2. By preparing a bank reconciliation statement, the customer becomes sure of the correctness of the bank balance shown by the cash book. It helps him in making further transactions with the bank. For example, suppose the cash book shows a bank balance of ₹ 20,000, whereas the balance shown by the pass book is ₹ 15,000. By reconciling the two, it is disclosed that cheques for ₹ 5,000 were deposited into the bank but have not been collected so far (or some of these have been dishonoured). In such a case, further cheques will be issued by assuming the bank balance of ₹ 15,000 only.
3. A reconciliation statement facilitates the preparation of a revised cash book. For example, the entries relating to bank charges, interest allowed or charged by the bank, direct payment by the bank on our behalf etc. will be recorded in the pass book but for which there is no entry in the cash book. Such entries will now be recorded in the cash book as well.
4. Periodic preparation of this statement reduces the chances of embezzlement by the staff of the firm or even that of the bank. For example, if a cashier merely makes an entry in the cash book but does not deposit the cash and cheques into the bank, it will be disclosed by preparing a bank reconciliation statement.
5. A reconciliation statement helps in revealing the unnecessary delay in the collection of cheques by the bank.
6. It also helps in keeping a track of cheques which have been sent to the bank for collection.