how to do bank reconcilation?

At the end of a financial year i.e., as 31.03.07 , you prepare trial balance, at the end , you indicate the bank balance, along with cash on hand. Here cash on hand will be in Dr side always. But bank balance, may be either in in Dr side if you Cr in bank balance. or at CR side if you have negative balance. This balance, normally differs, when compared with your bank statement i.e., amount mentioned as on 31.03.07. The adjusting the balance, you need to prepare a statement , which is called Bank Reconciliation Statement.

This difference happens, because, before 31.03.07 you might have submitted, some cheques to your bank for clearance, on same day you enter the amount as received, but actually, it was yet to clear, hence bank statement will not reflect these, amounts.( short in balance )

Accordingly, you must have issued, some cheques, which are yet to cleared by bank, and debted to your account. This will also not be reflected in bank statement. ( excess amount).

So you have to put it in order, and make Bank reconciliation statement. I will give you very simple example:

Balance in books Rs. 5,00,000. Balance as per Bank statement Rs. 3,00,000. Now:, prepare like this.

balance as per bank statement Rs. 3,00,000.00.

less cheques issued but to be

debited. Rs. 50,000.00

-----------------------

Rs. 2,50,000.00

add cheques deposited, but yet

to be credited to account Rs. 2,50,000.00

-----------------------

Balance as per books Rs. 5,00,000.00.

Your reconciliation statement is over, difference is clarified. If you got this basic, you can adjust, any amount. If you have taken O.D. then bank balance shows - ve balance, this also has to be adjusted as per above example. Good luck.