Method Of Bank Reconciliation

 Prepare the bank reconciliation statement reconciling the bank statement
 balance with the correct cash book                                      
 balance in either of the following two ways:

 (i)  First method (Starting with the cash book balance) 

 (ii) Second method (Starting with the bank statement balance)

  First Method (Starting With the Cash Book Balance):

(a) If the cash balance is a debit balance, deduct from it all cheques, drafts etc., paid into
 the bank but not collected and credited by the bank and added to it all cheques drawn on the
 bank but not yet presented for payment. The new balance will agree with bank statement.

(b) If the bank balance of the cash book is a credit balance (overdraft), add to it all
cheques, drafts, etc., paid into the bank but not collected by the bank and deduct from it
all cheques drawn on the bank but not yet presented for payment. The new balance will
then agree with the balance of the bank statement.

Second Method (Starting With the Bank Statement Balance):

(a) If the bank statement balance is a debit balance (an overdraft), deduct from it all cheques,
   drafts, etc., paid into bank but not collected and credited by the bank and add to it all cheques
   drawn on the bank but not yet presented for payment. The new balance will then be agree with
    the balance of the cash book.

(b) If the bank statement balance is a credit balance (in favor of the depositor), add to it all
cheques, drafts, etc., paid into the bank but not collected and credited by the bank and deduct
from it all cheques drawn on the bank but not yet presented for payment. The new balance will agree
 with the balance of the cash book.