Summary of business financial activity that reconciles business financial details is a bank reconciliation statement. It is to ensure that all the debit and credit payments processed and deposited on the same date. Once in a month accountant needs to prepare this statement.
BRS (Bank reconciliation statement) is made to ensure that in future, there should be no transaction discrepancy. Bank reconciliation statement often made by the bank as well to provide all the transactions of bank records should match the transactions simplified in cash book. BRS is made to reconcile the differences between files of passbook and cashbook.
Why Prepare a Bank Reconciliation Statement?
No company needs to make a bank reconciliation statement, and there is not any fixed date as well. It prepared periodically as whenever required. However, It is good practice to make one every month to ensure the files of yours, and the bank has the same records.
There is a need for BRS statement because it detects the errors between the transactions you made the whole month.
Process & Format:
To prepare BRS (Bank reconciliation statement), you need to follow the same details and the steps to make it correctly.
- First, you need to compare both of your bank column accounts like your cash book with your passbook.
- Second, you need to compare both of them differently. The example you need to compare the credit side of bank statement with the debit side of cash book and the credit side of cash book with the debit side of the bank statement.
- Analyze both of the book entries and check if there is any missing entry present in your cash book but not in your bank statement.
- Make the list of those entries.
- Make some correction in your records and compare the balances again.
- The result will be equal to your cash book and your bank statement.
Format of BRS do contain only three columns – one is for particulars, one is the debit side, and the last one is the credit side.
Benefits of Preparing a BRS Statement:
To reduce the risk of your transactions you should ask your accountant to prepare a BRS statement at least once in a month to ensure all the transactions of your bank should match the cash book of your records.
Some of the benefits:
- Detecting Errors: This statement will help you to spot any errors in your account history.
- Tracking Interest & Fees: Sometimes, we don’t know about the interest and fees charged by the bank but will the help of BRS statement we can add and deduct such entries.
- Detecting Frauds: It does help with spotting any fraudulent transactions that have been made without your permission.
- Tracking Receivables: It allows you to confirm the receipts that you had deposited and that you had not.
Bank reconciliation statement is something that needs to prepared every single month to ensure all the transactions you made during the month should match the records. It also helps to identify any fraudulent activity in your account. However, It is quite impossible to stop these kinds of actions at once, but, with BRS, You can at least save your account in the future.