Error on bank statement (amount incorrectly dr or cr)
Businesses maintain cash books to record both cash as well as bank transactions. Show
A Cashbook has a cash column that shows cash available with the business and a bank column that shows cash at the bank. Bank also keeps an account for every customer in their books. All the deposits are recorded on the credit side of the 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 the cash book and bank statement doesn’t match. In case the 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 that is prepared for reconciling the difference between balances as per the cash book’s bank column and passbook on a given date. Why Prepare a BRS?It‘s not compulsory to prepare a BRS and there’s no fixed date for preparing BRS. BRS is prepared on a periodical basis for checking that bank related transactions are recorded properly in the 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. How to prepare a BRS
Benefits of preparing a BRSAccounting errors could lead to circumstances that are more than just embarrassing when the cheques bounce or companies start getting annoying calls from creditors or suppliers for payments that are already released. Bank reconciliations assist you in spotting fraud and reducing the risk of transactions that could cause penalties and late fees. BRS offers several advantages to a business which includes:
Tips to ensure efficient BRS
File your returns in just 3 minutes 100% pre-fill. No manual data entry What happens if there is a mistake on a bank statement?If the bank discovers the error, they can withdraw the funds without your permission, freeze your account or place a hold on the funds. Any checks you've written could bounce; automatic bill payments you've set up may not get funded. If your bills don't get paid on time, you might face late fees from creditors.
How bank errors are treated in bank reconciliation statement?In case the bank reconciliation statement begins with the debit balance as per the bank column of the cash book, add all the amounts erroneously credited by the bank and deduct all the amounts erroneously credited by the bank. Do vice-versa in case its start with the credit balance.
What are the common errors in bank reconciliation statement?Bank Reconciliation Errors: Examples
Check-printing charges. Customer checks that were returned for insufficient funds. Bank fees for returned checks. Other bank fees, such as safe deposit box fees.
How do you record errors in bank reconciliation?Recording errors should be added or subtracted from the book balance. If the item cleared the bank for less than the amount in the books, add the amount of the error. If the item cleared the bank for more than the amount in the books, subtract the amount of the error.
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