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A Bank Reconciliation Statement is a statement prepared to reconcile the differences between the balance of the bank account as shown in the cash book maintained by the business and the balance shown in the pass book provided by the bank. In accountancy, it is common that the balance appearing in the cash book and the balance as per the pass book do not tally at a given point of time, even though they relate to the same bank account. This mismatch arises because of timing differences, omissions, or errors in recording transactions. The main purpose of preparing a Bank Reconciliation Statement is to identify these differences, ascertain the correct bank balance, and ensure accuracy in accounting records. It also helps to detect any errors, frauds, or unauthorized transactions, thereby serving as an important internal control mechanism. The cash book maintained by the business has a bank column which records all deposits made into the bank and all withdrawals from it. Similarly, the bank maintains an account for the customer and provides a pass book or bank statement showing all deposits received and withdrawals honored. Ideally, the balances of both should match, but in practice, differences are frequent. These differences are due to various causes which can be broadly classified into timing differences, errors, and omissions. The causes of disagreement between the balance as per the cash book and the balance as per the pass book can be explained as follows. One important cause is the timing difference in recording cheques issued. When the business issues a cheque to a supplier, it is immediately entered on the credit side of the cash book. However, the bank records this transaction only when the cheque is presented for payment. ___ ________ ____ ___ __________ ____ __________ ______ _____ ___.
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