Accountancy · Ch 5 — Bank Reconciliation Statement
Summary
Summary
- A Bank Reconciliation Statement (BRS) is a statement prepared to reconcile the difference between the bank balance as per the Cash Book (firm's records) and the bank balance as per the Pass Book (bank's records) on a given date.
- Differences arise due to timing gaps (transactions recorded by one party but not yet by the other) and errors in either book.
- Debit balance as per Cash Book means a favourable balance (cash at bank); Credit balance as per Cash Book means an overdraft (bank overdraft).
- Cheques issued but not yet presented for payment — reduces Cash Book balance but not yet Pass Book balance; add back when reconciling from Cash Book to Pass Book.
- Cheques deposited but not yet credited/collected — increases Cash Book balance but not yet Pass Book balance; subtract when reconciling from Cash Book to Pass Book.
- Direct debits by bank (e.g., bank charges, interest on overdraft, payment of insurance premium, dishonour of a cheque) — recorded in Pass Book first; subtract from Cash Book balance.
- Direct credits by bank (e.g., interest on bank balance, dividend collected, direct deposit by a customer) — recorded in Pass Book first; add to Cash Book balance.
- Errors in Cash Book (e.g., wrong totalling, omission of a transaction) — correct the Cash Book before preparing BRS.
- Errors in Pass Book (e.g., wrong entry by bank) — adjust in BRS by adding or subtracting the erroneous amount. …