What Is Bank Reconciliation Statement?

In business we keep our bank account in the cash book, as a part of the three column cash book, i.e. bank account in the cash book means two bank columns on the both sides of two column or three column cash book. It is made up everyday, and we record in it (bank columns) all cheques received from our debtors and all cheques paid or issued to our creditors or suppliers. We shall also have several contra entries every month, recording excess cash paid in or cash drawn out when required for personal or office use. At the end of the month the cash book (bank column) balanced and the result is a bank balance, (as per cash book). Thus the cash book (bank columns) tells us, what our balance with the bank is on a particular date.

In the same way, the bank also keeps a record of our bank account with the title "depositor's account" and enters into our account everyday what is paid in and what is drawn out. At the end of any day the bank will gladly tell us our bank balance (as per bank record), so two reciprocal accounts are kept in bank account (cash book) in books of the depositor and depositor's account in books of the bank. The balance shown by the two accounts (bank A/c and depositor's A/c) should be equal because when the bank account is debited (bank column of cash book is debited), the depositor's A/c is credited in the bank books and vice versa.

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