A bank reconciliation statement in Bangladesh ensures a company’s records, i.e. cash book, and the bank’s records, the passbook, are matched. By this, we get the accurate financial report that any business needs for making decisions, filing taxes, making payments, and so on.
Sometimes, discrepancies can be seen in the bank reconciliation statement. But there is a solution to that. In this article, we have covered everything and bank reconciliation statements.
What Is a Bank Reconciliation Statement?
A bank reconciliation statement (BRS) is a document prepared to match the bank balance shown in the company’s cash book with the bank balance shown in the bank’s passbook.
In Bangladesh, banks are required to issue statements every month. A company’s accountant, who is responsible for preparing the BRS, receives the bank statement. He reconciles the statement with the company’s records. The purpose of this bank reconciliation statement is to identify discrepancies that could affect tax and financial reporting.
Why Are Bank Reconciliation Statements Important in Bangladesh?
There is very little chance for any fraud and financial inconsistencies in Bangladesh when people practice the bank reconciliation statement.
Maintaining Accurate Financial Records
Comparing the bank statement with the company’s transaction allows us to identify the discrepancies and errors. This helps to keep records accurate & up-to-date.
Preventing Frauds and Detecting Errors
With a bank reconciliation statement, it’s easy to find explanations about the differences between the cash book and passbook. So you can hardly expect any fraud or errors in your records.
Managing Cash Flow for Businesses and SMEs
After identifying the discrepancies and errors, BRS ensures accurate financial records. In short, it fairly shows your cash balance. This makes it easier for business owners to timely pay creditors, suppliers, and audit payroll expenses.
Simplifying Tax Filing and Financial Reporting
BRS ensures completeness in a company’s financial records. So, you can easily file your taxes and report about your financial records without any doubts.
Meeting Compliance with Bangladesh Bank and NBR
A company’s financial record must reflect the bank account’s true state. And this is required by the Bangladesh Bank and the National Board of Revenue (NBR). The practice of preparing bank reconciliation statements helps businesses to comply with this rule.
Common Reasons for Differences Between Bank Statement and Company Accounts
Errors, omissions, and timing differences are some of the reasons why bank statements and company accounts don’t match. But there can be more reasons, like
Checks Issued but Not Presented
When a company issues a check for payment to a vendor or creditor, it reduces the amount from its cash. But until that check is presented and cashed, the bank will not deduct the amount from its records.
Direct Bank Charges, Interest, and Fees
Banks often take charges like ATM fees, service fees, overdraft fees, and transfer fees. Although these charges are debited in the bank account, they don’t reflect in the company’s records.
Interest earned on savings accounts is directly added to the bank account but doesn’t reflect in the company’s accounts. Similarly, the interest on the loan that the company has taken will be deducted from the bank account first. These deductions and additions are not reflected in the cashbook until the bank issues the statement.
Bank Errors
Bank errors are rarely possible but possible. Potential issues may arise from the following reasons:
- Incorrect posting
- Double posting
- Missing transactions
- Misattributing transactions to a wrong account
- Mistakes in recording the date or amount of the transaction.
Unrecorded Deposits
Sometimes, clients or debtors issue payments or checks in the company’s bank account. The bank records it, but the company doesn’t yet record it.
Standing Instructions (Loan EMI, DPS, etc.)
Standing instructions are the pre-arranged instructions to the bank. These can be payments for interest on loans, EMIs, DPSs, etc. The bank processes these instructions automatically and records the transaction in the bank account. Meanwhile, these transactions do not immediately reflect the company’s internal records.
Transaction Timing Differences in Bangladesh
When a company issues a check, the bank doesn’t record it immediately, but the company records it. These types of checks are called outstanding checks that make differences between bank statements and company records.
When and How Often Should You Reconcile Bank Accounts in Bangladesh?
It is recommended to reconcile bank accounts at least monthly after receiving the bank statement each month.
Recommended Frequency for Different Businesses
Cash-intensive businesses and high-volume retailers must perform the bank reconciliation daily. Businesses with moderate transactions can do it weekly. Small to medium businesses can also do it weekly. And businesses with fewer transactions, like freelancers, can do it monthly.
Impact of Missing a Reconciliation
A missing reconciliation may lead to inaccurate financial statements. For that, a company can experience financial errors, leading to poor decision-making. Also, problems can arise in tax filings, and there will be a chance of increasing bank charges and fraud.
How to Prepare a Bank Reconciliation Statement in Bangladesh
Follow this step-by-step guide to prepare your bank reconciliation statement.
Step 1: Collect Required Bank Statements and Cash Book
Firstly, you will need your company’s updated financial records and your latest bank statement. If your accounting software directly integrates with your bank, you can collect the bank statement from there. And while gathering the company records, don’t miss the general ledger and check register.
Step 2: Compare Balances and Note Discrepancies
Now, compare the transactions shown in your records with the bank statement. Look for the mismatched transactions.
Step 3: Identify Outstanding Checks and Deposits
Discrepancies, like outstanding checks and deposits in transit, can be obvious. Note them out to adjust with the bank statement.
Step 4: Adjust the Cash Book or Bank Statement
Subtract and add the transactions where required to match your records with the bank statement.
Step 5: Record Adjustments
Now, record the adjusting entries to your company’s accounts. This aligns the cashbook with the passbook and keeps the records accurate.
Step 6: Finalize and Approve the BRS
Finally, when you see all the records are matched with clear reasons, approve the BRS.
Pro Tip: Use Accounting Software Like Financfy, Tally, QuickBooks, or Bengali Accounting Tools
The best and easiest way to reconcile bank statements is through accounting software. Financfy, Tally, QuickBooks, and other Bengali accounting tools can be of great help here. Once you integrate any of the software into your accounting system, they will automate the financial records. It means the software will automatically match the records by highlighting the discrepancies. The exceptional workflow management features of this software prepare appropriate BRS and financial records.
Bank Reconciliation Statement Format in Bangladesh
Not all of us know what the format of a bank reconciliation statement is. Here is what you need to follow.
What Should be Included in a Basic Bank Reconciliation Statement Template in Bangladesh
- Business name and bank account number
- Date of reconciliation
- Closing balance at the top
- Opening cash balance as per bank statement
- Add deposit in transit
- Deduct outstanding checks
- Adjusted cash balance
- Opening balance as per the company’s records
- Add receivables collected by bank
- Add interest earned
- Deduct NSF check
- Deduct service charges and errors on check
Formats Available for Download
We have provided some easy-to-edit bank reconciliation statement templates for you to start work immediately.
Bank Reconciliation Statement in PDF
- Secure and non-editable
- Provides offline access
- Ensures a uniform format
- Guides through necessary fields
- Easy for printing and mailing
Bank Reconciliation Statement Template in Excel
- Offers formulas and automatic calculations.
- Enables sorting, filtering, and charting
- Analyses existing data
- Provides offline access
Bank Reconciliation Statement Template in Word
- Allows for explanations alongside financial data
- Offers customizable editing options
- Suitable for formal submissions
- Can be combined with other word documents
Bank Reconciliation Statement Template in Google Sheet
- Allows multiple users to view and edit
- Accessible from any device
- Offers real-time monitoring
- Less chance for data loss
Bank Reconciliation Statement Template in .doc
- Allows for real-time updates
- Suitable for digital and printed reports
- Can be merged with other reports of same format
- No storage is required
How to Use the Blank Bank Reconciliation Statement Template
Now, what to put on a blank bank reconciliation statement format? Let’s see.
Step-by-Step Guide for Each Format
- Input your opening balance: Start by entering the opening balance from your previous bank statement. This is the balance that carries forward from the last reconciliation.
- Record deposits in transit: Include any deposits that have been made but are not yet reflected in the bank statement. These are funds that are in transit but haven’t been processed by the bank.
- List outstanding checks: Add any checks that have been issued but haven’t cleared the bank yet. These are amounts that will be deducted once the checks are processed.
- Include adjustments for bank fees or errors: Account for any bank charges, fees, or errors identified during the reconciliation process. Make sure to add or subtract these from your balance as needed.
- Confirm the reconciled balance: After entering all adjustments, confirm that the bank statement balance matches the adjusted book balance. The two should reconcile at this stage.
Tips for Customizing Your Bank Reconciliation Statement
Here are some tips to help you enhance your bank reconciliation statement.
- Add your company logo and header in your BRS.
- Adjust fonts and color schemes
- Include digital signatures for approvals.
- Review the statement by staff that have expertise in BRS.
- Check the balance of the cash book.
- Input dates properly.
- Detect the errors
- Check the cashbook entries.
Benefits of Each Format
Each of the formats here can be of great use for different purposes. Here’s how.
The PDF format is secure as it’s non-editable. It can be ideal for audit submissions.
Excel
The Excel format offers formulas and automatic calculations that make the accountant’s task easier.
Word
Word is ideal for creating customized reconciliation statements with text and figures. It is perfect for detailed reports.
Google Sheets
With Google Sheets, multiple users can edit and update the document simultaneously. It is a great choice for teams working together.
.doc File
Like Word, a .doc file is versatile for creating reconciliation statements with text and formatting. It’s easy to edit and save for future reference or updates.
Challenges in Preparing Bank Reconciliation Statements in Bangladesh
Facing challenges while preparing a bank reconciliation statement is a common thing. Here are the common challenges you may encounter:
Manual Recordkeeping Issues
Keeping the records manually can result in omissions, delayed entries, and errors in transposition.
Delayed Bank Updates
Delayed bank updates can cause a timing difference between the company’s cash book and the bank’s passbook. For example, the outstanding deposits, unpresented cheques, and unrecorded bank transactions make differences in both parties’ records.
Cheque Clearance Delays (Still Common in Bangladesh)
Cheque clearance delays are also a reason for time differences and discrepancies in the company’s records and the bank’s records.
Multiple Bank Accounts and Transactions
With multiple bank accounts, a business may experience various transactions. Identifying the accounts from the balance sheet, income statement, and cash flow will become more complex. Also, for each bank account, you need different BRS. This way, there will be a higher risk for errors and omissions, and it is a very time-consuming process if done manually.
Benefits of Using Automated Accounting Software for Bank Reconciliation
To create an accurate bank reconciliation statement, automated accounting software like Financfy, Tally, QuickBooks, and Local Accounting Solutions can help businesses more. The following are the benefits of using this software:
- Tracks financial records and automates calculation
- Saves time and reduces the chance for errors
- Ensures real-time reconciliation
- Provides better financial insights for SMEs
- Generates BRS reports whenever needed
Conclusion
Every business, be it small or medium enterprises or multinational companies, needs to prepare the bank reconciliation statement. This is an important document for operating error-free financial management. As businesses need to prepare BRS frequently, or at least monthly, it’s better to rely on digital accounting solutions like Financfy. It automatically generates accurate BRS reports, reducing manual errors.
FAQs
1.Who Should Prepare a Bank Reconciliation Statement?
A company’s accounts payable department is in charge of preparing a bank reconciliation statement.
2. How Long Should BRS Records Be Kept?
In Bangladesh, it’s advisable to keep records of a company’s bank reconciliation statement for at least seven years from the date of the bank reconciliation.
3. Can Bank Errors Be Claimed Later in Bangladesh?
Yes, bank errors can be claimed later. But if the date for claiming expires, customers can escalate this issue and complain about it to the Customer Interest Protection Centre (CIPC) of Bangladesh Bank.
4. Are There Legal Requirements for BRS in Bangladesh?
There are no legal requirements for BRS, nor is it legally mandated. It’s advisable for companies and businesses to do so for proper records of their financial accounts.
5. What’s the Impact of Not Reconciling Regularly?
Not reconciling regularly, especially in a cash-intensive business, can lead to inaccurate financial records. This will ultimately create financial loss and poor decision-making.
