What is a Bank Statement or Bank Pass Book?

 A copy of the account, of the account holder in the books of the bank, is known as Bank Statement or Bank Pass Book. It is issued by the bank to the account holder so that entries in the Bank Reconciliation Statement or Bank Pass Book can be compared with the entries in the Cash Book and the difference is determined.

A debit balance in the Bank Statement or Bank Pass Book means an amount payable by the account holder to the bank, whereas a credit balance means an amount payable by the account holder; i.e., an amount receivable by the account holder from the bank.

Preparing a Bank Statement is important because of the following reason:

1. Preparing and reviewing a bank statement ensures that the financial records are accurate.
2. Regularly preparing bank statements helps in early detection of fraudulent activities.
3. Bank statements provide a clear picture of the cash flow, showing all inflows and outflows within a period. This information is crucial for effective cash flow management, allowing businesses to make informed financial decisions.
4. Reviewing bank statements aids in budgeting and financial planning. By analyzing past transactions, businesses can forecast future expenses, allocate resources more effectively, and set realistic financial goals.
5. Maintaining accurate bank statements is essential for compliance with financial regulations and standards.
6. Banks and financial institutions often require detailed financial statements, including bank statements, when evaluating loan applications.

A Bank Statement and a Bank Reconciliation Statement are often considered as same. But there are differences between them. A Bank Pass Book is the true copy of the account of the customer in the books of the bank, whereas a Bank Reconciliation Statement is a statement prepared mainly to reconcile the differences between the ‘Bank Balance’ shown by the Cash Book and Bank Pass Book.