Question

what is bank reconciliation statement?why is it prepared ?​

Answer 1

Answer:

Businesses maintain cash book to record both the cash as well as bank transactions. A Cashbook has a cash column which shows cash available with the business and a bank column which shows cash at bank.

Bank also keeps an account for every customer in their books. All the deposits are recorded on credit side of customer’s account and withdrawals are on the debit side of their account. An account statement is sent regularly to the customers by the bank.

Sometimes the bank balances as per cash book and bank statement doesn’t match. In case balance available in the passbook doesn’t match the bank column of the cash book, the business should identify the reasons for the same. It is important to reconcile the differences.

For reconciling the balances as shown in the Cash Book and passbook a reconciliation statement is prepared known as Bank Reconciliation Statement or BRS. In other words, BRS is a statement which is prepared for reconciling the difference between balances as per cash book’s bank column and passbook on a given date.

Answer 2

BRS is prepared on a periodical basis for checking that bank related transactions are recorded properly in cash book's bank column and also by the bank in their books. BRS helps to detect errors in recording transactions and determining the exact bank balance as on a specified date.