TABLE OF CONTENT

Sl.No. Particulars Page no.

1. Profile of the company 1
2. About the topic 23
3. Meaning of Bank Reconciliation 24-30
4. Reasons for difference between bank pass book and 30-32
cash book
5. Objectives of the study 33
6. Scope and Limitation 33
7. Research methodology 34
8. Types of banking accounts at HPCL 35
9. NOC Banking Account Reconciliation 35
10. Bank Statement Entry /Upload 36
11. Reviewing JDE bank statement 36-37
12. Bank Statement Header 37
13. Bank Statement Detail 38
14. Auto reconcile Void Receipts 40
15. Refresh Reconciliation File 40
16. Bank Reconciliation 41
17. Reconcile Self-balancing items(Bank Statement Side) 44
18. Reconcile Self-balancing items(General Ledger Side) 45
19. Reconciliation of Operating/Main Bank Accounts 46
20. Conclusion 47
21. Bibliography 48

5
PROFILE OF THE COMPANY

PETROLEUM INDUSTRY IN WORLD

The petroleum industry includes the global processes of exploration, extraction, refining,
transporting (often by oil tankers and pipelines), and marketing petroleum products. The
largest volume products of the industry are fuel oil and gasoline (petrol). Petroleum (oil) is
also the raw material for many chemical products, including pharmaceuticals, solvents,
fertilizers, pesticides, and plastics. The industry is usually divided into three major
components: upstream, midstream and downstream. Midstream operations are usually
included in the downstream category.

Petroleum is vital to many industries, and is of importance to the maintenance of industrial

civilization in its current configuration, and thus is a critical concern for many nations. Oil
accounts for a large percentage of the world’s energy consumption, ranging from as low of
32% for Europe and Asia, up to a high of 53% for the Middle East.

Other geographic regions’ consumption patterns are as follows: South and Central America
(44%), Africa (41%), and North America (40%). The world consumes 30 billion barrels (4.8
km³) of oil per year, with developed nations being the largest consumers. The United
States consumed 25% of the oil produced in 2007.[1] The production, distribution, refining,
and retailing of petroleum taken as a whole represents the world's largest industry in
terms of dollar value.

Governments such as the United States government provide a heavy public subsidy to
petroleum companies, with major tax breaks at virtually every stage of oil exploration and
extraction, including for the costs of oil field leases and drilling equipment.

6
A company's general ledger account Cash contains a record of the transactions (checks
written, receipts from customers, etc.) that involve its checking account. The bank also
creates a record of the company's checking account when it processes the company's
checks, deposits, service charges, and other items. Soon after each month ends the bank
usually mails a bank statement to the company. The bank statement lists the activity in the
bank account during the recent month as well as the balance in the bank account.

When the company receives its bank statement, the company should verify that the
amounts on the bank statement are consistent or compatible with the amounts in the
company's Cash account in its general ledger and vice versa. This process of confirming the
amounts is referred to as reconciling the bank statement, bank statement reconciliation,
bank reconciliation, or doing a "bank rec." The benefit of reconciling the bank statement
knows that the amount of Cash reported by the company (company's books) is consistent
with the amount of cash shown in the bank's records.

Because most companies write hundreds of checks each month and make many deposits,
reconciling the amounts on the company's books with the amounts on the bank statement
can be time consuming. The process is complicated because some items appear in the

29
company's Cash account in one month, but appear on the bank statement in a different
month. For example, checks written near the end of August are deducted immediately on
the company's books, but those checks will likely clear the bank account in early
September. Sometimes the bank decreases the company's bank account without informing
the company of the amount. For example, a bank service charge might be deducted on the
bank statement on August 31, but the company will not learn of the amount until the
company receives the bank statement in early September. From these two examples, we
can understand why there will likely be a difference in the balance on the bank statement
vs. the balance in the Cash account on the company's books. It is also possible (perhaps
likely) that neither balance is the true balance. Both balances may need adjustment in
order to report the true amount of cash.

After you adjust the balance per bank to be the true balance and after you adjust the
balance per books to also be the same true balance, you have reconciled the bank
statement.
 BANK RECONCILIATION

Bank reconciliation is a process that explains the difference between the bank balance
shown in an organization's bank statement, as supplied by the bank, and the
corresponding amount shown in the organization's own accounting records at a particular
point in time.

Such differences may occur, for example, because a cheque or a list of cheques issued by
the organization has not been presented to the bank, a banking transaction, such as a
credit received, or a charge made by the bank, has not yet been recorded in the
organization's books, or either the bank or the organisation itself has made an error.

It may be easy to reconcile the difference by looking at very recent transactions in either
the bank statement or the organisation's own accounting records (cash book) and seeing if
some combination of them tallies with the difference to be explained. Otherwise it may be
necessary to go through and match every single transaction in both sets of records since
the last reconciliation, and see what transactions remain unmatched. The necessary
adjustments should then be made in the cash book, or any timing differences recorded to
assist with future reconciliations.

30
For this reason, and to minimise the amount of work involved, it is good practice to carry
out such reconciliations at reasonably frequent intervals. Reconciliations are generally
performed by specialised accounting software though the understanding of what occurs is
important for a successful reconciliation

OBJEICTIVES OF BANK REICONCILIATION STATEMENT

  To know the correct bank balance.
  To record the correct balance of cash at bank in the trial balance and the balance sheet.
  
To make necessary adjustments prior to the end of the term.
  
To find out the errors if any and to correct them in time.
  
For the completion of cash records.
  
To verify the payment made through checks.
 
To know the amounts of checks and draft collected.
 Bank Reconciliation Process

Step 1. Adjusting the Balance per Bank

We will demonstrate the bank reconciliation process in several steps. The first step is to
adjust the balance on the bank statement to the true, adjusted, or corrected balance. The
items necessary for this step are listed in the following schedule:

Step 1. Balance per Bank Statement on Aug. 31, 2011

Adjustments:
Add: Deposits in transit
Deduct: Outstanding checks
Add or Deduct: Bank errors
Adjusted/Corrected Balance per Bank

Deposits in transit are amounts already received and recorded by the company, but are
not yet recorded by the bank. For example, a retail store deposits its cash receipts of
August 31 into the bank's night depository at 10:00 p.m. on August 31. The bank will
process this deposit on the morning of September 1. As of August 31 (the bank statement
date) this is a deposit in transit.

Because deposits in transit are already included in the company's Cash account, there is no
need to adjust the company's records. However, deposits in transit are not yet on the bank
statement. Therefore, they need to be listed on the bank reconciliation as an increase to
the balance per bank in order to report the true amount of cash.

32
A helpful rule of thumb is "put it where it isn't." A deposit in transit is on the
company's books, but it isn't on the bank statement. Put it where it isn't: as an
adjustment to the balance on the bank statement.

Outstanding checks are checks that have been written and recorded in the company's
Cash account, but have not yet cleared the bank account. Checks written during the last
few days of the month plus a few older checks are likely to be among the outstanding
checks.

Because all checks that have been written are immediately recorded in the company's
Cash account, there is no need to adjust the company's records for the outstanding checks.
However, the outstanding checks have not yet reached the bank and the bank statement.
Therefore, outstanding checks are listed on the bank reconciliation as a decrease in the
balance per bank.
 Recall the helpful tip "put it where it isn't." An outstanding check is on the
company's books, but it isn't on the bank statement. Put it where it isn't: as an
adjustment to the balance on the bank statement.

Bank errors are mistakes made by the bank. Bank errors could include the bank recording
an incorrect amount, entering an amount that does not belong on a company's bank
statement, or omitting an amount from a company's bank statement. The company should
notify the bank of its errors. Depending on the error, the correction could increase or
decrease the balance shown on the bank statement. (Since the company did not make the
error, the company's records are not changed.)

Step 2. Adjusting the Balance per Books

The second step of the bank reconciliation is to adjust the balance in the company's Cash
account so that it is the true, adjusted, or corrected balance. Examples of the items
involved are shown in the following schedule:

Step 2. Balance per Books on Aug. 31, 2011

Adjustments:

33
Deduct: Bank service charges
Deduct: NSF checks & fees
Deduct: Check printing charges
Add: Interest earned
Add: Notes Receivable collected by bank
Add or Deduct: Errors in company's Cash account
Adjusted/Corrected Balance per Book

Bank service charges are fees deducted from the bank statement for the bank's processing
of the checking account activity (accepting deposits, posting checks, mailing the bank
statement, etc.) Other types of bank service charges include the fee charged when a
company overdraws its checking account and the bank fee for processing a stop payment
order on a company's check. The bank might deduct these charges or fees on the bank
statement without notifying the company. When that occurs the company usually learns of
the amounts only after receiving its bank statement.

Because the bank service charges have already been deducted on the bank statement,
there is no adjustment to the balance per bank. However, the service charges will have to
be entered as an adjustment to the company's books. The company's Cash account will
need to be decreased by the amount of the service charges.

Recall the helpful tip "put it where it isn't." A bank service charge is already listed on
the bank statement, but it isn't on the company's books. Put it where it isn't: as an
adjustment to the Cash account on the company's books.
An NSF check is a check that was not honored by the bank of the person or company
writing the check because that account did not have a sufficient balance. As a result, the
check is returned without being honored or paid. (NSF is the acronym for not sufficient
funds. Often the bank describes the returned check as a return item. Others refer to the
NSF check as a "rubber check" because the check "bounced" back from the bank on which
it was written.) When the NSF check comes back to the bank in which it was deposited, the
bank will decrease the checking account of the company that had deposited the check. The
amount charged will be the amount of the check plus a bank fee.

Because the NSF check and the related bank fee have already been deducted on the bank
statement, there is no need to adjust the balance per the bank. However, if the company
has not yet decreased its Cash account balance for the returned check and the bank fee,
the company must decrease the balance per books in order to reconcile.

Check printing charges occur when a company arranges for its bank to handle the
reordering of its checks. The cost of the printed checks will automatically be deducted from
the company's checking account.

Because the check printing charges have already been deducted on the bank statement,
there is no adjustment to the balance per bank. However, the check printing charges need
to be an adjustment on the company's books. They will be a deduction to the company's
Cash account.

Recall the general rule, "put it where it isn't." A check printing charge is on the bank
statement, but it isn't on the company's books. Put it where it isn't: as an adjustment
to the Cash account on the company's books.

35
Interest earned will appear on the bank statement when a bank gives a company interest
on its account balances. The amount is added to the checking account balance and is
automatically on the bank statement. Hence there is no need to adjust the balance per the
bank statement. However, the amount of interest earned will increase the balance in the
company's Cash account on its books.

Recall "put it where it isn't." Interest received from the bank is on the bank
statement, but it isn't on the company's books. Put it where it isn't: as an adjustment
to the Cash account on the company's books.

Notes Receivable are assets of a company. When notes come due, the company might ask
its bank to collect the notes receivable. For this service the bank will charge a fee. The bank
will increase the company's checking account for the amount it collected (principal and
interest) and will decrease the account by the collection fee it charges.Since these
amounts are already on the bank statement, the company must be certain that the
amounts appear on the company's books in its Cash account.
 Recall the tip "put it where it isn't." The amounts collected by the bank and the
bank's fees are on the bank statement, but they are not on the company's books. Put
them where they aren't: as adjustments to the Cash account on the company's books.

Errors in the company's Cash account result from the company entering an incorrect
amount, entering a transaction that does not belong in the account, or omitting a
transaction that should be in the account. Since the company made these errors, the
correction of the error will be either an increase or a decrease to the balance in the Cash
account on the company's books.

Step 3. Comparing the Adjusted Balances

After adjusting the balance per bank (Step 1) and after adjusting the balance per books
(Step 2), the two adjusted amounts should be equal. If they are not equal, you must repeat
the process until the balances are identical. The balances should be the true, correct
amount of cash as of the date of the bank reconciliation.

Step 4. Preparing Journal Entries

Journal entries must be prepared for the adjustments to the balance per books (Step 2).
Adjustments to increase the cash balance will require a journal entry that debits Cash and
credits another account. Adjustments to decrease the cash balance will require a credit to
Cash and a debit to another acco
Reasons of difference between cash book & pass book balance:

Cheque issued but not presented for payment: When cheque are issued then
immediately make entry in the cash book. The cheque issued can be presented for
payment to the bank within three month from the date of cheque as per banking law.
The cheques are presented for payment after the expiry of the above period then
payment is refused by the bank. This cheque is also known as stale cheque. It is
possible at the time when the balances of the two books are being compared, thus
more chances of causing a disagreement b/w the two balances.

Cheque paid into the bank but not yet cleared: As soon as the cheques are
deposited into the bank, the immediately entry is passed in the cash book. This will
make entry in pass book only when cheques are cleared. It is possible at the time
when the balances of the two books are being compared, thus more chances of
causing a disagreement b/w the two balances.

Interest allowed by the bank: Bank might have credited the account of the
customer with the interest and may have made the entry in the pass book. It is
possible that the entry of such interest may not have been made by the customer in
the cash book, thus causing a disagreement b/w the two balances.

Interest and Bank charges debited by bank: Sometime bank charges interest from
the customer then immediately entry in the pass book but not in cash book. so, in
this case when check the balance b/w cash and bank book then disagreement b/w the
two balances. So, it is the main reason to create difference b/w two books.
 Interest, dividend collected by the bank: sometime interest on government
security or dividend on share is collected by the bank and is credited to customer
account. If the entry does not appear in the cash book then balance will differ.

Direct payment by bank: Sometimes, standing instruction from the clients that,
certain payment like insurance premium, club fees instalment etc. are made by the
bank. Then this entry is recorded only in the pass book. This entry is made in the
cash book only when the necessary intimation to that effect is received from the
bank by the client. The entries in the cash and pass book may be on different dates.

Direct payment into the bank by a customer: Sometimes, our customer deposit
money direct into the account in the bank. It is only recorded in the pass book not in
the cash book. It is possible at the time when the balances of the two books are being
compared, thus more chances of causing a disagreement b/w the two balances.

Dishonour of bill discounted with the bank: Sometimes, customers get their bills
discounted with the bank. If the bank is not able to get payment of these bills on the
due date. it will debit the customer account with the amount of the bills together
with the nothing charges if any. The customer will pass the entry in the cash book
only. when balance of the two books are being compared, thus more chances of
causing a disagreement b/w the two balances.

Dishonour of cheque: When the received cheques are deposited into bank, these are
immediately recorded in the cash book. As a result cash book balance is increased.
but the deposited cheque is dishonoured due to lack of funds or due to other reasons.
Bank does not credit the amount of the depositor as a result disagreement b/w the
two balances.

Error and omissions: If any error is committed either by the bank or by a customer
in the cash book While recording a transaction in their respective books, it

Causing a disagreement b/w the two balances. the error may be:

1. Under cast/overcast of receipt side or payment side.

2. Bank charges omitted from the banks or recorded twice in the books.
3. Wrong carry forward of cash book balance.
 OBJECTIVES OF THE STUDY

  To know preparation of Bank Reconciliation at HPCL.

  
To know the efficiency of preparation.
 
To analyse the factors relating to differences in bank account and GL.

SCOPE AND LIMITATIONS

Scope
This study has been conducted in the Hindustan Petroleum Corporation (Regional
office)Mumbai. It covers the preparation of the bank reconciliation in HPCL and the
problems encountered in the preparation of the same. The study is mainly done to find out
various cause of the unmaching of reconciliation.It does not cover other aspects of accounting.

Limitations
The report is limited to the Hindustan Petroleum Corporation Regional Office at Vashi.

For taking Bank Reconciliation as a project gives only a small area of operation.
 PREPARATION OF BANK RECONCILIATION AT HPCL

Types of Banking Accounts at HPCL:

  
Non-Operative Collection Bank Account (NOC)
 
Operating Bank Accounts and Main Bank Accounts

NOC Bank Account Reconciliation

Following steps are involved in reconciliation for a NOC Bank Accounts for the location:

  
Bank Statement Entry/Upload
  
Review Bank Statement
  
Auto Reconcile Void Receipts
  
Refresh Reconciliation
  
Bank Reconciliation
  
Reconcile self-balancing items (Bank Statement side)
 
Reconcile self-balancing items (General Ledger side)

1. Bank Statement Entry/ Upload

The user depending on the requirements will use any one of the following methods of creating a
bank statement:

In cases where the user receives a printed Bank Statement only, he/ she will enter each transaction
from the statement in the system using an interactive program “Review Bank Statement”.

In cases where a location receives Bank Statement in electronic format such as a DBF file, the file
needs to be formatted in specific format .Locations can create the requisite format in an MS Excel
worksheet and upload the electronic bank statement received from the bank in it.

PREPARATION

For copying the Bank Statement records from the Excel File to the Bank Statement Detail just select
the cells in the Excel file and click copy. On the Bank Statement Detail click on the first cell on the
grid and press “Ctrl‟ + „v‟. The records will get created in the detail section. Wait for all the records
to get read by the system. Finally the cursor will come to rest on the last row with data in it. Bring
the cursor down to the last blank row. Click „OK‟. While uploading the records in this manner care
should be taken to see that the dates (Value date and GL date) are in DD/MM/YYYY format with

only “/” as the separator. Using “-“ or “.” as the separator will result in the Default GL date from the
Header to be entered in the records.

From your Location specific Bank Reconciliation menu, select Review JDE Bank Statement
(P09160). The following screen appea
  
Bank Statement Header

The user may ensure that the Bank Statement created in the system using the above described
method ties to the opening and closing balance as per Bank Statement. The following fields need to
be entered and reviewed carefully:

Beginning Balance Enter the opening balance as per Bank Statement

Ending Balance Enter the closing balance as per Bank Statement

Total Withdrawal The system updates this total after entry of each transaction with a
negative amount in the detailed part of the form.

Total Deposit The system updates this total after entry of each transaction with a
positive amount in the detailed part of the form.

Remaining After you enter the first transaction, the system displays a
Amount remaining amount. The remaining amount changes as you enter
each subsequent transaction. When the remaining amount is zero,
the statement is in balance.
 
Bank Statement Detail

Sr. Field NOC Main Bank Operating Description

No. Accounts Accounts
Accounts

1 Transaction BDS BDS / CK BDS/CK/ Hard Coded

Code /JE/OTH JE/OTH/
/ TT TT

2 Amount Required Required Required Amount

deposited/withdrawn

3 Value Date Required Required Required Original Date – Value

Date (Date on which
the bank debits/credits
the bank account.

4 GL Date Required Required Required Date on which the

transaction is booked

5 Reference BDS HPCL Cheque

Number Location Number for
Code BDS / CK,
0 for others

6 Doc. Type Required Required Required

 
Transaction Code Glossary:

Transaction Description/ usage Document

Type
Code

JE You can write a journal entry to record an adjustment made by JB

the bank, such as a service charge or a Telegraphic Transfer
(TT) fee. When you reconcile bank statements, the system
updates the Account Ledger table with a journal entry between
the bank account and the G/L account that you specify in the
Account Number field in the Details option of the exit bar.
During Reconciliation, the system marks transactions with this

45
 5. Bank Reconciliation

The last step is to complete the matching of records between the General Ledger Bank Account
records with the corresponding Bank Statement records. The application should be run in “Proof”
mode first. At this time, the system will not generate any entries. The application has several
matching iterations that could run to drop items depending upon the user requirement. The following
Matrix shows each iteration to be used, and the case in which it should be used. Using of iterations
in a wrong sequence would result in erroneous results.

When Processing Bank Statements across multiple periods:

While reconciling Bank Statements for multiple periods, run the reconciliation report for respective
Bank Statement separately. This can be achieved by giving the respective Statement Date as an
additional Data Selection criteria.

PREPARATION

From your location specific menu, select GL Bank Statement Reconciliation – Proof/Final
(R55B170).

At the Data Selection dialog box, verify that it contains the short account ID of your GL Bank
Account and reconciliation code of not equal to „R‟. Then click „Ok‟ to submit the data selection.

Upon submitting the data selection, the system will prompt at Processing Options dialog box.
Review and/or update the Processing Options. Of these, the Variance tab contains the iterations,
which will be the basis on which the records are reconciled. Use the information below for entering
the iterations as required for running the Bank Reconciliation.

Iteration

Transaction Code Main/Local Bank Consolidation 0 1 2 3 4 5

BDS Main Off NA Y Y Y Y N

BDS Local (NOC) On NA N N N N Y

BDS Local (NOC) Off NA Y Y Y Y Y

OTH / CK Local (Optg) On Y N N N N N

OTH / CK Local (Optg) Off Y N N N N N

The values in the above table determine the basis for the iteration:

0 = Check No + Amount

This iteration compares the Check No and Amount fields on the GL and Bank Statement side for an
exact match.

1 = Value Date + Amount

This iteration compares the Value date of the Bank statement with the value date in the GL (Check
Date field) and the amount fields on both sides for an exact match.

2 = Doc No + Date + Amount

This iteration compares the Value date of the Bank statement with the value date in the GL (Check
Date field), the Amount fields on both sides and the Reference 2 field with the Pymnt/Rect Number
field on the Bank Statement side. It also checks for BDS or Reference 1 field in the GL with the
Pymnt/Rect Number field on the Bank Statement side for other transactions for an exact match.

3 = Doc No + Date (+/- 5 days) + Amount

This iteration uses the same fields as that in Iteration 2 but with a number of days tolerance set to 5
days

4 = Doc No + Date + Amount (+/- Tolerance)

This iteration uses the same fields as that in Iteration 2 but with a user defined tolerance of amount
depending upon the value set in another processing option for this purpose. While using this
iteration it is important to populate the Processing Option no 2 on the Variance tab with „1‟ to
automatically create a Journal entry for the write off amount. Also the Account Number to be used
for the write off is to be provided in Processing Option no.5 of the same tab.

5 = Doc No + Amount

This iteration compares the Amount fields on both sides and the Reference 2 field with the
Pymnt/Rect Number field on the Bank Statement side for BDS or Reference 1 field in the GL with
the Pymnt/Rect Number field on the Bank Statement side for other transactions for an exact match.

49
CONCLUSION


HPCL
After undergoing an in-depth study of the report. One can easily recognize that
 ensures proper accounting for each and every rupee transacted through bank.



Utmost care is taken while implementing all the control measures and there is no
deviation from the laid down procedures. Various checklist of control  have been
 made as exhaustive as possible in dealing with the banking transactions







The functions, activities, roles and responsibilities of the concerned work groups are
also being performed very smoothly.

55
BIBLIOGRAPHY
www.hindustan petroleum.com
 
www.google .com

www.wikipedia.com

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 www.scribd.com
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