TS Grewal Class 11 Accountancy Solutions: Chapter 9 Overview

Meaning of a Bank Reconciliation Statement

A bank reconciliation statement is a record book of a bank account's transactions. This statement assists account holders in checking and tracking their funds, as well as updating the transaction record that they have created. A bank reconciliation statement is often referred to as a bank passbook. The balance shown in the statement's bank passbook must match the sum shown in the cash book. All deposits will be reflected in the credit column on the statement, while withdrawals will be recorded in the debit column. However, if the withdrawal exceeds the deposit, a negative balance will be displayed (overdraft).

The Significance of a Bank Reconciliation Statement

Generally, when comparing the company's cash book and bank balance, the balance does not add up. As a result, it is critical to identify the source of the difference and include it in the bank reconciliation statement before tallying the two balances. The bank reconciliation statement clarifies the amounts that fluctuate between the company's cash book and bank balance. The discrepancies between the cash book and the bank passbook are caused by the difference in transaction recording timing.

Many variables can contribute to the variation in timing, including:

• A bank-issued check that has not yet been deposited for payment

• Cheque paid in the bank but not yet cleared

• The bank conducted a direct debit from the customer's account.

• Cheque/funds put immediately into a bank account

• The bank collects dividends and interest.

• The consumer made a direct payment to the bank.

• Cheques deposited/bills reduced were not honoured.

In rare situations, a mistake in two balances might be made from either the bank or the company's cash book. Here are a few examples of mistakes:

• Errors committed by the firm when recording the transaction

• Errors caused by the bank when recording the transaction

Bank Reconciliation Statement Varieties

There are two techniques to prepare the Bank Reconciliation Statement:

• Documentation of a bank reconciliation statement that does not affect the cash book balance.

• After revising the cash book balance, the bank reconciliation statement is filed.

Methods for creating a Bank Reconciliation Statement:

• The date on which the statement is recorded is indicated first.

• Following that, the cash book balance is reported in the statement. The balance listed in the passbook is sometimes mentioned as well.

• Cheques deposited but not collected are deducted.

• Then the cheques issued but not deposited for payment are recorded, but the money immediately placed in the bank account is not.

• Deducted are all transactions such as overdraft interest, amounts debited by the bank but not recorded in the cash book, and dishonoured cheques and invoices.

• All credits and profits collected by the firm and deposited immediately in the bank are added.

• Errors are corrected, and the balance between the cash book and the statement should now be equal or the same.

Bank Reconciliation Statement Detail Explanation

In Chapter 9 of TS Grewal accountancy, you will learn all about the Bank Reconciliation Statements. Bank reconciliation covers all aspects behind identifying the difference between the balances of the passbook and the cash book. It is important to display all the records in the Bank Reconciliation Statement, which will help to tally all the records. You will learn about how they are made and what are the points you should know about when making a Bank Reconciliation Statement. There are mainly seven reasons for the difference in the bank statements of books they are as follows:

• Due to differences between the time of transactions.

• Due to the errors while recording the transaction.

• Paid cheque in the bank which is yet not cleared.

• The deposited cheque and the discounts made.

• If the bank made any direct debit from the customer’s side.

• Any amount or Cheque that has been deposited in the bank by the customer or by someone else.

• Any sort of error that has been made by the company or the bank, as such errors are prone to take place many times.

It is very essential to prepare the Bank Reconciliation Statement because of some reasons:

1. It locates the error and omissions that have been encountered during the time of transactions. The error detected can be now rectified easily

2. A reconciliation statement facilitates the preparation of revised cash for instance the transaction like interest allowed by the bank and direct payment by the bank on the account of customers were previously omitted will now be recorded in the cash book. 

3. To save money, reconciling your bank statements every month helps to identify subscriptions that are being charged, for example, Credit card fees being charged without any prior information.

Bank reconciliation is prepared when an account holder receives a passbook from the bank then tally it with the cash book and if there are differences, he picks them out and the differences are the reason for the mismatch of the balances than these picked items are added and subtracted according to from either passbook balance or cash book balance than the balances match.

TS Grewal Accountancy Chapter 9  Preparation Tips

TS Grewal’s accountancy chapter Bank Reconciliation Statement can be hard work for students but it can be a cup of tea if you remember some points. Points like when to debit something and when to credit something for a passbook or cash book, remember the items debited from the passbook should be credited in the cashbook or say the items or amount you will subtract from the cashbook should be added back in the passbook to get to exact balances.

So Chapter 9 of TS Grewal accountancy can be tough and easy at the same time you have to just get to the points like what to add and subtract and you will end up matching both the books.