5.2 Preparation of Bank Reconciliation Statement

. Preparation of Bank Reconciliation Statement After identifying the causes of difference, the reconciliation may be done in Preparation of bank reconciliation statement without adjusting cash book balance. Preparation of bank reconciliation statement after adjusting cash book balance. It may be noted that in practice, the bank reconciliation statement is prepared after adjusting the cash book balance, about which you will study later in the chapter.

. . Preparation of Bank Reconciliation Statement without adjusting Cash To prepare bank reconciliation statement, under this approach, the balance as per cash book or as per passbook is the starting item. The debit balance as per the cash book means the balance of deposits held at the bank.

Such a balance will be a credit balance as per the passbook. Such a balance exists when the deposits made by the firm are more than its withdrawals. It indicates the favourable balance as per cash book or favourable balance as per the passbook . On the other hand, the credit balance as per the cash book indicates bank overdraft .

In other words, the excess amount withdrawn over the amount deposited in the bank. It is also known as unfavourable balance as per cash book or unfavourable balance as per passbook.