Page 2 - Lesson Note

balance is negative is positive balance
dependence It depends on passbook as Pass book does not depend
many transactions in the on cash book as nothing is
cash book are recorded recorded with its help
with the help of pass book
like bank charges bank
interest etc
Balance sheet Balance of cash book finds Balance in pass book does
a place in the balance sheet not find place in the balance
sheet

Importance of Bank Reconciliation Statement:

Accounting errors could lead to circumstances which are more than just

embarrassing when the cheques bounce or companies start getting annoying
calls from creditors or suppliers for payments which are already released.

Bank reconciliations assist you in spotting fraud and reducing the risk of

transactions which could cause penalties and late fees. BRS offers several

advantages to a business which includes:

Detecting errors: A bank reconciliation helps you in spotting accounting

errors which are common to every business. These mistakes include errors

such as addition and subtraction, missed payments and double payments.

Tracking Interest and Fee: Banks might add interest payments, fees or

penalties on your account. Monthly bank reconciliation allows you to add or

subtract such amounts in your books.

Detecting Fraud: You may not be able to prevent employees from stealing
your money once, however, you could prevent it in future. Bank

reconciliations statement helps you in detecting and spotting fraudulent

transactions. It is advisable to employ an independent person to perform the
reconciliations for preventing the accounting employee from falsifying your

books and reconciliations.