Bank Reconciliation Statement

Learn how to prepare a Bank Reconciliation Statement with simple rules and practical examples

📘 What is a Bank Reconciliation Statement?

A Bank Reconciliation Statement (BRS) is a statement prepared to reconcile the balance shown by the Cash Book with the balance shown by the Pass Book or Bank Statement.

It explains the reasons for the difference between the two balances and helps in checking the accuracy of bank-related transactions.

🔍 Why is BRS Prepared?

• To find out the reasons for the difference between Cash Book and Pass Book balances.
• To check the accuracy of entries relating to bank transactions.
• To identify errors and omissions in the Cash Book or Pass Book.
• To know the correct bank balance as per the books.
• To keep proper control over bank transactions.

📋 Causes of Difference between Cash Book and Pass Book

The balances of Cash Book and Pass Book may differ because of timing differences and errors.

Cause	Explanation
Cheques issued but not presented	Cheques issued by the business but not yet presented to the bank for payment.
Cheques deposited but not collected	Cheques deposited into the bank but not yet credited by the bank.
Bank charges	Charges deducted by the bank but not yet recorded in the Cash Book.
Interest credited by bank	Interest credited by the bank but not yet entered in the Cash Book.
Direct deposits	Amount deposited directly into the bank account by a customer or other party.
Errors	Mistakes made while recording transactions in the Cash Book or Pass Book.

➕➖ Important Items in BRS

While preparing a BRS, the effect of each item depends on the starting balance and the reason for the difference.

1. Cheques issued but not presented:
The amount has been recorded in the Cash Book but has not yet been deducted by the bank.

2. Cheques deposited but not collected:
The amount has been recorded in the Cash Book but has not yet been credited by the bank.

3. Bank charges:
The bank has deducted the charges, but the business may not have recorded them in the Cash Book.

📝 How to Prepare a BRS?

• Start with the balance given in the question.
• Identify each item causing a difference.
• Determine whether the item should be Added or Less.
• Make the necessary adjustments one by one.
• Arrive at the balance shown by the other book.

💡 Simple Example

Suppose the balance as per Cash Book is ₹50,000.

A cheque of ₹5,000 issued to a supplier has not yet been presented for payment.

Since the cheque has already been deducted in the Cash Book but has not yet been deducted by the bank, the Pass Book balance will be higher by ₹5,000.

Therefore:

Balance as per Cash Book = ₹50,000
Add: Cheque issued but not presented = ₹5,000
Balance as per Pass Book = ₹55,000

📊 Format of Bank Reconciliation Statement

Particulars	Amount (₹)
Balance as per Cash Book	50,000
Add: Cheques issued but not presented	5,000
Less: Cheques deposited but not collected	3,000
Less: Bank Charges	500
Balance as per Pass Book	51,500

⭐ Important Points for Exams

• BRS is a statement, not an account.
• BRS is prepared to explain the difference between Cash Book and Pass Book.
• Always identify the starting balance before deciding Add or Less.
• Timing differences are one of the major reasons for differences between the two balances.
• Read every adjustment carefully before making the Add/Less treatment.

🎯 Quick Revision

BRS = Reconciliation of Cash Book and Pass Book

Cash Book → Business records bank transactions

Pass Book / Bank Statement → Bank records transactions relating to the customer's account

Objective: Find and explain the difference between the two balances.