Bank Reconciliation

Statement (BRS)
 Learning Outcomes

• Describe the purpose of bank

reconciliation statement

• Identify the causes of difference in cash

book and pass book
 Introduction
• Business organizations record all the cash and
bank transactions in cash book of the company.
The Bank also maintains an account for each
customer in its book.

• A copy of this account is regularly sent to the

customer by the bank which is called ‘Pass Book’
or ’Bank statement’.
 Cont…
• It is usually to tally the firm’s bank transactions as
recorded by the bank with the cash book but
sometimes the bank balances as shown by the cash
book and that shown by the bank statement do not
match.

• If the balance shown by the pass book is different

from the balance shown by bank column of cash
book, the business firm will identify the causes for
such difference. It becomes necessary to reconcile
them.
 Cont…

• To reconcile the balances of Cash Book

and Pass Book a statement is prepared.
This statement is called the ‘Bank
Reconciliation Statement’.
Need and Importance of BRS
1. The reconciliation process helps in bringing out the errors
committed either in Cash Book or Pass Book.

2. Bank reconciliation statement may also show any undue

delay in the clearance of cheques.

3. Sometimes the cashier may have the tendency of cheating,

like he makes entries in the Cash Book, but does not deposit
the cash into bank. These types of frauds by the
entrepreneur’s staff or bank staff may be detected only
through bank reconciliation statement. So this way bank
reconciliation statement acts as a control technique too.
 Preparing Bank Reconciliation
Statement
1. Favourable balances:
(a) Debit balance as per cash book is given and the
balance as per pass book is to be ascertained.
(b) Credit balance as per pass book is given and the
balance as per cash book is to be ascertained.
2. Unfavourable balance/overdraft balance:
(a) Credit balance as per cash book (i.e. overdraft) is given
and the balance as per pass book is to be ascertained.
(b) Debit balance as per pass book (i.e. overdraft) is given
and the balance as per cash book is to be ascertained.
Illustration 1: From the following prepare a bank
reconciliation statement on 31st March 2005
(favourable balance of cash book).

1. Balance as per Cash Book Rs.1,80,000

2. Cheques paid into the Bank March 2005 but credited by the
bank in April 2005 Rs.7,900
3. Cheques issued in March 2005 but cashed in April 2005
Rs.11,000
4. Cheques entered in the Cash Book in March 2005 but paid
into bank in April 2005 Rs.1,000
5. Interest allowed by the bank Rs.2500
6. Interest charged by the bank Rs.500
 2.
From the following particulars of Mr. Vinod, prepare bank
reconciliation statement as on March 31, 2014.
1. Bank balance as per cash book Rs. 50,000.
2. Cheques issued but not presented for payment Rs.
6,000.
3. The bank had directly collected dividend of Rs. 8,000
and credited to bank account but was not entered in the
cash book.
4. Bank charges of Rs. 400 were not entered in the cash
book.
5. A cheques for Rs. 6,000 was deposited but not collected
by the bank.
 3.
From the following particulars of Mr. James, prepare BRS as on March
31, 2016:
1. Balance as per Cash Book was Rs.18000 as on 31.3. 2016
2. The following cheque were paid into bank on 25th March but credited
to James a/c in first week of April:
Amar..Rs.550..Akbar..Rs.850..Anthony..Rs.300
3. The following cheque were issued by firm in March and were
cashed in April:
Princy..Rs.350..Ashika..Rs.450..Nazeema..Rs.500
4. A cheque for Rs.300 which was received from a customer was
entered in bank column of cash book in March but same was paid
into bank in April.
5. A cheque for Rs.500 was credited to the account and was not
passed through cash book
6. Pass book shows a credit balance of Rs.200 for interest and a debit
of Rs.100 for bank charges.
Illustration 4: (Unfavourable balance of cash
book)
On December 31, 2006, the cash book of the M/s.
Mona Plastics shows the credit balance Rs.6,500.
• Cheques amounting to Rs. 3,500 deposited into
bank but were not collected by the bank.
• Firm issued cheques of Rs. 1,000 which were not
presented for payment.
• There was a debit in the pass book of Rs.200 for
interest and Rs.400 for bank charges.
Prepare Bank Reconciliation Statement.
Illustration 5: (Favourable balance of Pass book) Bank Pass
book of M/s. Brahm Industries showed a credit balance of
Rs. 27,350 on July 31,2006. The following differences were
found on that date between the cash book and the pass book:
1. Cheques issued before July 31,2006, amounting to Rs. 19,000
had not been presented for payment.
2. Two cheques of Rs. 5,000 and Rs. 3,500 were deposited into
bank on July 31, but the bank gives credit for the same in August.
3. Insurance premium directly paid by the bank Rs. 5,000.
4. Rs. 2,000 wrongly debited to the firm’s account by the bank.
Prepare Bank Reconciliation Statement as on July 31, 2006.
Illustration 6: (Unfavourable balance of pass book)
From the following particulars of Neha and Co. prepare
Bank Reconciliation Statement on March 31,2006
• Overdraft as per pass book 16,500
• Interest on overdraft 1,600
• Insurance premium paid by the bank 800
• Cheques deposited but not yet credited 5,500
• Cheques issued but not present for payment 6,000
• Wrongly credit to firm account by the bank 1,000
 7.
• From the following particulars, prepare Bank
Reconciliation statement as on December 31,
2006.
• (a) Balance as per Cash Book Rs.4,200
• (b) Cheques issued but not presented for
payment Rs.2,000
• (c) Cheques deposited but not collected
Rs.3,000
• (d) Bank charges debited by the bank Rs.250
 8.
Overdraft shown by the passbook of M/s. Mohit trader is
Rs.40,000. Prepare Bank Reconciliation statement on
December 31,2006.
(a) Bank charges debited as per pass book Rs.1,000
(b) Received a payment directly from customer Rs.7,000
(c) Cheques wrongly recorded in debit side of cash book
Rs.4,000
(d) Cheques issued but not presented for payment Rs.9,800
(e) Cheques deposited with the bank but not collected Rs.
12,500
(f) Insurance premium paid by the bank Rs.3,500
 9.
On April 1, 2006, Rohan had an overdraft of Rs.16,000 as
shown by the cash book. Cheques amounting to
Rs.6,000 had been paid by him but not collected by the
bank till date. He issued cheques of Rs.8,000 which
were not presented to the bank for payment. There was
a debit in his passbook of Rs.500 for interest and Rs.200
for bank charges and a cheque of Rs.5000 was paid into
bank but the same was debited twice in the cash book.

Prepare Bank Reconciliation Statement.

 10.
The bank statement of Arthur & Co. showed an overdraft of Rs.
56,740 as on 30th September, 2004. The cash book, however,
showed a positive balance of Rs. 45,520 as on the same date.
The accountant of Arthur & Co. found that the difference in the
balance was due to the following:
1. Cheques issued to supplier not yet presented 1,54,320
2. Cheques deposited in the bank not yet credited by the latter
2,06,200
3. A cheque received by the bank from a customer has been
wrongly credited by the bank in Andersen & Co. account 64,720
4. Dividend received by the bank not yet intimated 15,740
5. Bank charges not yet recorded in the cash book 1,400
 11
On March 31, 2014, Rakesh had on overdraft of
Rs. 8,000 as shown by his cash book. Cheques
amounting to Rs. 2,000 had been paid in by him
but were not collected by the bank. He issued
cheques of Rs. 800 which were not presented to
the bank for payment. There was a debit in his
passbook of Rs. 60 for interest and Rs. 100 for
bank charges.
Prepare bank reconciliation statement.
 12
On March 31, 2014 the bank column of the cash book of
Agrawal Traders showed a credit balance of Rs.
1,18,100 (Overdraft). On examining of the cash book
and the bank statement, it was found that :
1. Cheques received and recorded in the cash book but not
sent to the bank of collection Rs. 12,400.
2. Payment received from a customer directly by the bank
Rs. 27,300 but no entry was made in the cash book.
3. Cheques issued for Rs. 1,75,200 not presented for
payment. Interest of Rs. 8,800 charged by the bank was
not entered in the cash book. Prepare bank
reconciliation statement.
 13
From the following particulars of Asha & Co. prepare a
bank reconciliation statement on December 31,
2014.
• Overdraft as per passbook 20,000
• Interest on overdraft 2,000
• Insurance Premium paid by the bank 200
• Cheque issued but not presented for payment 6,500
• Cheque deposited but not yet cleared 6,000
• Wrongly debited by the bank 500
From the following particulars, prepare a bank reconciliation statement as on March
31, 2014.
(a) Debit balance as per cash book is Rs. 10,000.
(b) A cheque for Rs. 1,000 deposited but not recorded in the cash book.
(c) A cash deposit of Rs. 200 was recorded in the cash book as if there is not bank,
column therein.
(d) A cheque issued for Rs. 250 was recorded as Rs. 205 in the cash column.
(e) The debit balance of Rs. 1,500 as on the previous day was brought forward as a
credit balance.
(f) The payment side of the cash book was under cast by Rs. 100.
(g) A cash discount allowed of Rs. 112 was recorded as Rs. 121 in the bank
column.
(h) A cheque of Rs. 500 received from a debtor was recorded in the cash book but
not deposited in the bank for collection.
(i) One outgoing cheque of Rs. 300 was recorded twice in the cash book.
From the following particulars, prepare the bank reconciliation
statement of Shri Krishan as on March 31, 2014.
(a) Balance as per passbook is Rs. 10,000.
(b) Bank collected a cheque of Rs. 500 on behalf of Shri Krishan but
wrongly credited it to Shri Krishan’s account.
(c) Bank recorded a cash book deposit of Rs. 1,589 as Rs. 1,598.
(d) Withdrawal column of the passbook under cast by Rs. 100.
(e) The credit balance of Rs. 1,500 as on the pass-book was recorded
in the debit balance.
(f) The payment of a cheque of Rs. 350 was recorded twice in the
passbook.
(g) The pass-book showed a credit balance for a cheque of Rs. 1,000
deposited by Shri Kishan.