Bank Reconciliation Statement (BRS)

1
48
What is Bank Reconciliation Statement?

Bank Reconciliation Statement is a statement prepared to reconcile and explain the causes of disagreement between the bank balance as per cash book and the same as per pass book  or bank statement as on a particular date.

It is not a part of accounts or double entry system.

The entries in the cash book must be checked against those appearing in the pass book or bank statement and ticked on agreement. The unticked items in both books will account for the difference in the balance shown by each.

Features:
i. It is a statement and not an account.
ii. It is prepared on a particular date and not for a period.
iii. Prepared at periodical intervals, usually at the end of every month.
iv. It is prepared by the account holder and not by the bank.
Objectives:
  1. Explains the causes of disagreement between the bank balance as per the cash book and bank    balance as per the pass book/bank statement as on a particular date.
  2. Helps in detection of errors in the cash book and pass book. However it does not correct such errors.
Watch the videos for more detailed discussion
Common causes of disagreement between the balances of Cash Book and Pass Book:
  1. Cheques deposited into bank but not credited by the bank.
  2. Cheques issued but not yet presented for payment.
  3. Cheques received and entered in the bank column of the cash book but omitted to be deposited into the bank.
  4. Interest credited by the bank but not entered in the cash book.
  5. Bank charges or interest on overdraft debited by the bank but not entered in the cash book.
  6. Amounts directly paid into bank account by debtors but not yet entered into the cash book.
  7. Payments and remittances by bank under standing order, debited in the bank account but not yet entered in the cash book.
  8. Income collected and credited by the bank under standing order but not yet recorded in the cash book, e.g., insurance claim, dividend, rent, interest on securities.
  9.  Mistakes made either by the bank or the firm in recording the transactions.

Problem 1:
On 31st August, 2016, the Pass Book of Mr Sharma showed a bank balance of Rs. 1575/-. A comparison of the entries with the Cash Book showed:

  1. He had deposited cheques of Rs 580/- which had not yet been cleared.
  2. He had issued cheques for Rs. 960/- on 18th August, out of which those of Rs. 640/- were presented on 3rd September.
  3. The pass book showed a credit of Rs 25/- on account of interest allowed by bank.


Mr Sharma’s bank balance as per Cash Book on the same date was Rs. 1490/-

Prepare a statement reconciling the bank balance as per Cash Book with that as per Pass Book.


For discussion on the common causes of disagreement and solution of above problem watch the video below:



Problem 2:

Prepare a Bank Reconciliation Statement from the following particulars as on 31st December 2016:

  1.  Balance as per Pass Book is Rs. 8620.
  2. Cheques for Rs 4860 were deposited into the bank but credited only Rs 3260 upto 31st December 2016.
  3. A customer directly deposited into bank Rs 470.
  4. Interest credited by bank Rs 230.
  5. Bank charges Rs 30.
  6. Balance as per cash book Rs 9550.

The Solution of the above problem is in this video:


Problem 3:

Reconciliation when overdrawn balances are given:

Prepare a Bank Reconciliation Statement of M/s Fakir Chand as on 31.03.2017 from the following information:

  1. Overdraft as per Cash Book – Rs. 5270
  2. Overdraft as per Bank Statement – Rs. 5960
  3. Cheques issued but not presented for payment – Rs. 1150
  4. Interest on overdraft charged by the bank but not entered in the Cash Book – Rs. 120.
  5. Dividend received by the bank but not recorded in the cash book – Rs. 450
  6. Cheques deposited into bank but not creditedRs. 2170.
The solution of the above problem is in this video:


Problem 4:

Reconciliation from Cash Book of one period and Pass Book of the following period

From the following entries in the bank column of the Cash Book of Mr. Wasim and the corresponding Bank Pass Book, prepare a reconciliation statement as on 31.03.2017:
Cash Book (bank column only)

Date
Particulars
Amount
Date
Particulars
Amount
01.03.2017
To balance
3400
07.03.2017
By Drawings
1500
10.03.2017
To Dheer & Sons
500
08.03.2017
By Salary
2200
13.03.2017
To S Kunti
4000
15.03.2017
By Jalan & Co.
3000
18.03.2017
To Kejriwal & Bros
1200
28.03.2017
By Latif Bros.
1550
28.03.2017
To Neera & Co.
2200
29.03.2017
By Paul & Co.
800
29.03.2017
To Salim & Co.
5700
30.03.2017
By Mahesh Enterprise
400
31.03.2017
To Arvind
3425
31.03.2017
By Satish Lamba
1600
31.03.2017
By Balance
9375
20425
20425


Bank Pass Book (of Mr Wasim’s Account in Central Bank)

Date
Particulars
Amount
Date
Particulars
Amount
01.04.2017
To balance (Overdraft)
750
02.04.2017
By Dividends
500
02.04.2017
To Paul & Co.
800
02.04.2017
By Neera & Co
2200
04.04.2017
To Mahesh Enterprise
400
03.04.2017
By Achinta
200
08.04.2017
To Moktan
2300
03.04.2017
By Salim & Co.
5700
10.04.2017
To Drawings
500
05.04.2017
By Arvind
3425
10.04.2017
To Arvind (Cheque Dishonoured)
3425
10.04.2017
By Diwakar
170
For solution of Problem 4 watch the video below:

That is all for Bank Reconciliation Statement. E Mail me if you have any questions relating to the topic. See you in my next blog soon. 🙂


For more please click here to visit my YouTube Channel

SHARE
Next articleReserves and Provisions
The Commerce Tutor is a YouTube Channel and a Finance Blog where we provide finance education to empower our readers. Learn Accounts, Taxes and MS Excel easily with Us.

1 COMMENT

LEAVE A REPLY

Please enter your comment!
Please enter your name here