Accountancy · Ch 8 — Bank Reconciliation Statement
Preparing a BRS Starting from the Cash Book Balance
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Preparing a BRS Starting from the Cash Book Balance
When starting with the balance as per Cash Book (a favourable/debit balance) and working towards the balance as per Pass Book, each reconciling item is treated as follows:
| Item | Treatment (to arrive at Pass Book balance) |
|---|---|
| Cheques issued but not yet presented | ADD (the bank has not yet reduced its figure for this) |
| Cheques deposited but not yet collected | SUBTRACT (the bank has not yet increased its figure for this) |
| Bank charges / interest on overdraft debited by bank, not yet in Cash Book | SUBTRACT (bank has already reduced its figure) |
| Interest / dividend collected by bank, not yet in Cash Book | ADD (bank has already increased its figure) |
| Direct payment by bank under standing instructions, not yet in Cash Book | SUBTRACT |
| Direct deposit by a customer into the firm's bank account, not yet in Cash Book | ADD |
| Cheque deposited, later dishonoured, not yet in Cash Book | SUBTRACT |
Note
The underlying logic
ADD whatever the bank's own figure is currently, relatively, HIGHER for (something the bank has already recorded, or hasn't yet deducted); SUBTRACT whatever the bank's own figure is currently, relatively, LOWER for (something the bank hasn't yet added, or has already deducted). …
Definition 1Favourable Balance
A debit balance in the Cash Book's Bank column — money genuinely held in the bank, shown as an asset in …