Bank Reconciliation Statement is normally prepared by which party in order to reconcile differences between the cash book and the bank statement?

Introduction / Context:
A Bank Reconciliation Statement BRS is a fundamental topic in basic accounting. It is used to reconcile the balance as per the cash book with the balance as per the bank statement. This question checks whether you know who prepares the BRS and why. Understanding this helps in avoiding confusion between the records maintained by the customer and those maintained by the bank itself.

Given Data / Assumptions:

• The business maintains a cash book with a bank column that records receipts and payments through the bank.
• The bank sends a periodic bank statement or pass book showing the bank perspective of the customer account.
• Differences in timing and recording cause the two balances to differ.
• A reconciliation is required to explain these differences.

Concept / Approach:
The BRS is prepared by the account holder or business not by the bank. The purpose is for the business to identify timing differences such as cheques issued but not presented for payment cheques deposited but not yet credited bank charges standing orders and mistakes. By starting with one balance and adjusting for known items the business arrives at the balance as per the other record and gains confidence that its cash book is accurate. Banks maintain their own internal reconciliations but they do not prepare a BRS for each customer as part of routine operations. Instead they provide the bank statement and the customer reconciles it with the cash book.

Step-by-Step Solution:
Step 1: Identify the two records being compared. One is the cash book maintained by the business and the other is the bank statement issued by the bank.Step 2: Recognise that the business is responsible for ensuring that its own books are correct.Step 3: Understand that the bank simply provides a statement of transactions from its perspective.Step 4: Therefore the business prepares the Bank Reconciliation Statement to reconcile its cash book balance with the balance shown in the bank statement.Step 5: Match this understanding with the options and select the one that names the account holder or business as the preparer of the BRS.

Verification / Alternative check:
In practice every company prepares BRSs periodically often monthly. They start with the bank balance as per cash book and then add or subtract items such as cheques issued but not presented, bank charges, direct deposits, and errors. Once all adjustments are listed the reconciled balance equals the balance as per bank statement. This activity is clearly performed inside the business, not by the bank or the central bank, which confirms option B as the correct answer.

Why Other Options Are Wrong:
Option A suggests that the bank prepares a reconciliation between its ledger and the customer records. While banks do reconciliations of their own control accounts they do not prepare a BRS for each customer cash book. Option C states that external auditors prepare the BRS only during audit. Auditors may review or test BRSs but preparation remains the responsibility of management. Option D introduces the central bank which has no role in reconciling individual customer accounts. Therefore these options do not match the definition and purpose of a Bank Reconciliation Statement.

Common Pitfalls:
Candidates sometimes imagine that because the word bank appears in the name the bank must prepare the statement. Another error is to think of BRS as an audit document rather than a regular internal control tool. To avoid these mistakes remember that the BRS belongs to the entity that wants to ensure its own records agree with an external statement. That entity is the account holder or business.

Final Answer:
A Bank Reconciliation Statement is normally prepared by the account holder or business to reconcile the cash book balance with the bank statement balance.