Prepare bank reconciliation statement of Shri Bhandari as on March 31, 2017 (i) The Payment of a cheque for ₹

Numerical Questions · Q14

Q. Prepare bank reconciliation statement of Shri Bhandari as on March 31, 2017

(i) The Payment of a cheque for ₹ 550 was recorded twice in the passbook.

(ii) Withdrawal column of the passbook under cast by ₹ 200

(iii) A Cheque of ₹ 200 has been debited in the bank column of the Cash Book but it was not sent to bank at all.

(iv) A Cheque of ₹ 300 debited to Bank column of the cash book was not sent to the bank.

(v) ₹ 500 in respect of dishonoured cheque were entered in the passbook but not in the cash book. Overdraft as per passbook is ₹ 20,000.

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Concept understanding — Bank Reconciliation Purpose

The Everyday Intuition

Imagine you and a friend keep a shared record of money you've lent each other. You note down every loan and repayment in your personal diary. Your friend does the same in theirs. At the end of the month, you sit together to compare diaries. You expect them to match — but they don't. You find a ₹500 entry in your diary that your friend hasn't recorded yet. Whose record is correct? Both are, for now — the difference is just a matter of timing.

That's exactly what a Bank Reconciliation Statement does. It compares your Cash Book (your diary of bank transactions) with the Pass Book (the bank's diary of your account). The goal is to find and explain any differences between the two balances.

The Precise Meaning

A Bank Reconciliation Statement is a statement prepared to reconcile (make agree) the bank balance as per the Cash Book with the bank balance as per the Pass Book on a given date. It is not a ledger account — it is a statement that lists the reasons for the difference.

The Cash Book shows the bank balance from the business's point of view. The Pass Book shows it from the bank's point of view. Both should eventually show the same balance, but at any given moment, they often differ because of:

Timing differences — cheques issued but not yet presented, cheques deposited but not yet cleared
Errors — mistakes in recording by either party
Direct entries by the bank — interest credited, bank charges debited, direct deposits, dishonoured cheques

Important

The Bank Reconciliation Statement is not a correcting entry. It is a detective tool — it identifies discrepancies so you can then make the necessary adjustments in the Cash Book.

Why It Matters

Three reasons, each critical for a Class 12 student to understand:

1. Accuracy of records. The Cash Book is the primary record of bank transactions for the business. If it doesn't match the bank's record, the business cannot trust its own cash position. A reconciliation ensures the Cash Book is correct.

2. Detection of errors and fraud. A persistent difference might reveal a cheque that was never deposited, a bank charge you didn't know about, or — in extreme cases — an unauthorised withdrawal. The reconciliation is the first line of defence.

3. Reliable financial statements. The bank balance shown in the Balance Sheet must be accurate. If the Cash Book balance is wrong, the Balance Sheet is wrong. Reconciliation ensures the final accounts show the true financial position.

Note

In practice, businesses prepare a Bank Reconciliation Statement every month as soon as the bank statement (Pass Book) arrives. It is a routine internal control procedure.

Accounting Treatment

Here is the key distinction: the Bank Reconciliation Statement itself involves no journal entries. It is a statement, not an account. The journal entries come after the reconciliation, when you discover items that need to be recorded in the Cash Book.

What gets recorded in the Cash Book?

Items that appear in the Pass Book but not yet in the Cash Book must be entered. These are typically:

Item	Effect on Cash Book	Journal Entry
Interest credited by bank	Increases bank balance	Debit Bank A/c, Credit Interest A/c
Bank charges debited	Decreases bank balance	Debit Bank Charges A/c, Credit Bank A/c
Direct deposit by customer	Increases bank balance	Debit Bank A/c, Credit Customer's A/c
Cheque dishonoured	Decreases bank balance	Debit Customer's A/c, Credit Bank A/c
Direct payment by bank (e.g., insurance premium)	Decreases bank balance	Debit Expense A/c, Credit Bank A/c

Watch out

A common mistake: students try to pass journal entries in the Bank Reconciliation Statement. Do not. The statement only lists differences. The entries are made in the Cash Book after the reconciliation is done.

What about the other items? …

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Starting from the overdraft as per pass book (₹20,000) and adjusting each item for its effect on the cash-book balance:

Particulars	Plus (₹)	Minus (₹)
Overdraft as per Pass Book		20,000
(i) Cheque payment recorded twice in pass book	550
(ii) Withdrawal column of pass book undercast		200
(iii) Cheque debited in cash book but not sent to bank	200
(iv) Cheque debited in cash book but not sent to bank	300
(v) Dishonoured cheque in pass book, not in cash book	500
Overdraft as per Cash Book (balancing figure)	18,650
Total	20,200	20,200

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The pass book shows an overdraft of ₹20,000 (a credit/unfavourable bank balance). We adjust it for the five differences to find the overdraft as per cash book. By strict first-principles reconciliation the cash-book overdraft works out to ₹18,650; the NCERT-printed key is ₹21,350 — this honest gap is explained at the close.

Concept & treatment

A Bank Reconciliation Statement (BRS) explains why the balance in the firm's Cash Book (bank column) differs from the balance in the bank's Pass Book on a given date. An overdraft is a credit balance in the cash book (the firm owes the bank), so it is an unfavourable balance. When we start with the overdraft as per pass book and want the cash book figure, each difference is treated by asking: does this item make the cash-book overdraft higher or lower than the pass book? Items that make the cash book less overdrawn are placed in the Plus (+) column; items that make it more overdrawn go in the Minus (–) column.

Treatment of each item

(i) Cheque payment ₹550 recorded twice in the pass book — the bank debited the customer twice, so the pass-book overdraft is ₹550 higher than it should be. The cash book (correctly recorded once) is less overdrawn ⇒ Plus ₹550.
(ii) Withdrawal column of pass book undercast by ₹200 — withdrawals (which raise overdraft) are understated by ₹200, so the pass-book overdraft is too low; the true cash-book overdraft is higher ⇒ Minus ₹200.
(iii) & (iv) Cheques of ₹200 and ₹300 debited in the cash book but never sent to the bank — the cash book has treated them as deposits (receipts), so it is less overdrawn than the pass book (which never received them) ⇒ Plus ₹200 and Plus ₹300.
(v) Dishonoured cheque ₹500 entered in pass book but not in cash book — the bank debited the firm ₹500, raising the pass-book overdraft; the cash book has not, so it is less overdrawn ⇒ Plus ₹500.

Bank Reconciliation Statement of Shri Bhandari as on March 31, 2017

Particulars	Plus (₹)	Minus (₹)
Overdraft as per Pass Book	—	20,000
(i) Cheque payment recorded twice in pass book	550	—
(ii) Withdrawal column of pass book undercast by ₹200	—	200

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Q.Prepare bank reconciliation statement of Shri Bhandari as on March 31, 2017

Concept & treatment

Treatment of each item

Bank Reconciliation Statement of Shri Bhandari as on March 31, 2017

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