Bank Reconciliation

Statement

Fundamentals Of Accounting
 Bank Reconciliation Statement
• Strictly speaking there should be no
difference in Cash Book and Pass book.
• However on a particular date it is possible
that balances on both the books do not
tally.
• After finding the reasons for non
agreement of the bank balances efforts
are made to reconcile. This statement is
prepared in the form of BRS.
Fundamentals Of Accounting: 2
Bank Reconciliation Statement
 Importance of BRS

• Errors which may have been committed

• Undue delay in clearance of cheques
• Discourages staff from embezzlement

Fundamentals Of Accounting: 3
Bank Reconciliation Statement
 Reasons for Differences
• Timing differences
- cheques issued but not presented
- Cheques paid into bank but not presented
- interest and dividend collected by bank
- bills collected by bank on behalf of the
customer
- direct payment by bank
• Due to errors in recording the entries

Fundamentals Of Accounting: 4
Bank Reconciliation Statement
 Illustration 1
From the following particulars ascertain the balance that
would appear in the Bank Pass Book of A on 31st
December, 2006.
(1) the bank overdraft as per Cash Book on 31st
December, 2006 Rs. 6,340.
(2) Interest on overdraft for 6 months ending 31st
December, 2006 Rs. 160 is entered in Pass Book.
(3) Bank charges of Rs. 30 for the above paid are
debited in the Pass Book.
(4) Cheques issued but not cashed prior to 31st
December, 2006, amounted to Rs. 1,168.

Fundamentals Of Accounting: 5
Bank Reconciliation Statement
 Continued:
(5) Cheques paid into bank but not cleared
before 31st December, 2006 were for Rs. 2,170.
(6) Interest on investments collected by the bank
and credited in the Pass Book Rs. 1,200.
Note: In this illustration the point to note is the
opening balance is an overdraft. Hence, items
which increase the balance at bank will be
deducted from the overdraft since money
deposited will reduce the overdraft. Similarly,
item which reduce the balance at bank will be
added to the overdraft.
Fundamentals Of Accounting: 6
Bank Reconciliation Statement
 Answer 1
Plus Minus

Particulars Amount Amount

Rs. Rs.
Overdraft as per Cash Book 6,340.
Interest debited in Pass Book but not yet in Cash 160
Book 1,168
Cheques issued but not yet presented 2,170
Cheques paid in but not yet credited by the Bank 30
Bank charges
Interest collected and credited by the Bank in the 1,200
Pass Book but not yet entered in Cash Book 2,368
6,332
Overdraft as per Pass Book (Rs. 8,700 – 2,368) 8,700 8,700
Total Fundamentals Of Accounting: 7
Bank Reconciliation Statement
 Illustration 2

On 30th September, 2006, the bank account of X, according to

the bank column of the Cash Book, was overdrawn to the extent
of Rs. 4,062. On the same date the bank statement showed a
balance of Rs. 1,400 in favour of X. An examination of the Cash
Book and Bank Statement reveals the following:
1. A Cheque for Rs. 1,140 deposited on 29th September,
2006 was credited by the bank only on 3rd October, 2006.
2. A payment by cheque for Rs. 160 has been entered twice
in the Cash Book.
3. On 29th September, 2006, the bank credited an amount of
Rs. 1,740 received from a customer of X, but the advice was
not received by X until 1st October, 2006.

Fundamentals Of Accounting: 8
Bank Reconciliation Statement
 Continued:
4. Bank charges amounting to Rs. 58 had not been
entered in the Cash Book.
5. On 6th September, 2006, the bank credited Rs.
2,000 to X in error.
6. A bill of exchange for Rs. 1000 was discounted by X
with his bank. This bill was dishonoured on 28th
September, 2006 but no entry had been made in the
books of X.
7. Cheques issued upto 30th September, 2006 but not
presented for payment upto that date totalled Rs. 3760.

Fundamentals Of Accounting: 9
Bank Reconciliation Statement
 Continued:

You are required:

(a) To show the appropriate rectifications required in the
Cash Book of X, to arrive at the correct balance on 30th
September, 2006 and
(b) to prepare a bank reconciliation statement as on that
date.

Fundamentals Of Accounting: 10
Bank Reconciliation Statement
 Answer 2
Solution

(a) CASH BOOK (Bank Column)

Date Particulars Amount Date Particulars Amount
2006 Rs. 2006 Rs.
Sept Sept
30 To Party A/c 160 30 By Balance b/d 4,062
“ Customer A/c “ Bank charges 58
(Direct deposit) 1,740 “ Customer A/c
“ Balance c/d 3,220 B/R dishonoured) 1,000
5,120 5,120

Fundamentals Of Accounting: 11
Bank Reconciliation Statement
 Answer Contd:
(b) Bank Reconciliation Statement as on 30th September, 2006

Particulars Rs.
Overdraft as per Cash Book 3,220
Add: Cheque deposited but not collected upto 30th Sept., 2006 1,140
4,360

Less: Cheques issued but not presented for payment

upto 30th Sept., 2006 3,760
Credit by Bank erroneously on 6th Sept. 2,000
Balance as per bank statement 1,400

Fundamentals Of Accounting: 12
Bank Reconciliation Statement
 Continued:

Note: Bank has credited X by 2,000 in error on 6th

September, 2006. If this mistake is rectified in the
amendment bank statement, this will not be deducted in
the above statement along with R.s 3,760 resulting in
debit balance of Rs. 600 as per pass-book.

Fundamentals Of Accounting: 13
Bank Reconciliation Statement
 Illustration 3
On 30th December, 2006 the bank column of A. Philip’s cash book
showed a debit balance of Rs. 461. On examination of the cash
book and bank statement you find that :

1. Cheques amounting to Rs. 630 which were issued to creditors

and entered in the cash book before 30th December, 2006 were
not presented for payment until that date.
2. Cheques amounting to Rs. 250 had been recorded in the cash
book as having been paid into the bank on 30th December, 2006,
but were entered in the bank statement on 1st January, 2007.
3. A cheque for Rs. 73 had been dishonoured prior to 30 December,
2006, but no record of this fact appeared in the cash book.

Fundamentals Of Accounting: 14
Bank Reconciliation Statement
 Continued:
4. A dividend of Rs. 38, paid direct to the bank had not been
recorded in the cash book..
5. Bank interest and charges amounting to Rs. 42 had been charged
in the bank statement but not entered in the cash book.
6. No entry had been made in the cash book for a trade subscription
of Rs. 10 paid vide banker’s order in November, 2006.
7. A cheque for Rs. 27 drawn by B. Philip had been charged to A.
Philips bank account by mistake in December, 2006.
You are required:
(a) to make appropriate in the cash book bringing down the correct
balance, and
(b) to prepare a statement reconciling the adjusted balance in the
cash book with the balance shown in the bank statement.

Fundamentals Of Accounting: 15
Bank Reconciliation Statement
 Answer 3
Solution
(a) A. Philip
(b) Dr. Cash Book (Bank column) Cr.
Date Particulars Amount Date Particulars Amount
2006 Rs. 2006 Rs.
Dec. To Balance b/d 461 Dec. 30 By Debtor-Cheque 73
30 To Dividends received 38 Dishonoured
By Bank interest and charges 42
By Trade Subscription 10
Dec. 31 By Balance c/d 374
499 499

2007 To Balance b/d 374

Jan., 1
(b) Bank Reconciliation Statement
as at 30th December, 2006
Particulars Details Rs. Amount
Remarks
Balance per cash book 374 In hand
Add: Cheques not yet presented 630
1,004 In hand
Deduct : Lodgement not yet recorded by bank 250
Fundamentals Of Accounting: 754 16
Bank Reconciliation
Deduct: Cheque wrongly charged (confirmed with) Statement 27
 Illustration 4
From the following information, prepare a Bank reconciliation
statement as at 31st December, 2006 for Messers New Steel
Limited: Rs.
(1) Bank overdraft as per Cash Book
on 31st December, 2006. 2,45,900
(2) Interest debited by Bank on 26th December, 2006
but no advice received 27,870
(3) Cheque issued before 31st December, 2006 but
not yet presented to Bank 66,000
(4) Transport subsidy received from the State
Government directly by the Bank but not
advised to the company 42,500

Fundamentals Of Accounting: 17
Bank Reconciliation Statement
 Continued:
(5) Draft deposited in the Bank, but
not credited till 31st December, 2006 13,500
(6) Bills for collection credited by the
Bank till 31st December, 2006 but no
advice received by the company 83,600
(7) Amount wrongly debited to
company account by the Bank,
for which no details are available 7,400

Fundamentals Of Accounting: 18
Bank Reconciliation Statement
 Answer 4
Solution

M/s. New Steel Ltd.

Bank Reconciliation Statement as on 31st Dec. 2006

Particulars Rs. Rs.

Overdraft as per Cash Book 2,45,900

Add: Interest charged by the bank 27,870
Draft deposited in bank but not yet credited 13,500
Wrong debit by the bank, under verification 7,400 48,770
2,94,670
Less: Cheque issued but not yet presented 66,000
Transport subsidy not yet recorded in the Cash Book 42,000
Bills for collection credited in the bank not yet entered in
the Cash book 83,600 1,92,100
1,02,570

Fundamentals Of Accounting: 19
Bank Reconciliation Statement
 Illustration 5

The bank account of Mukesh was balanced on 31st

March, 2006. it showed an overdraft of Rs. 5,000. The
bank statement of Mukesh showed a credit balance of
Rs. 76, 750. Prepare a bank reconciliation statement
taking the following into account:
(1) Cheques issued but not presented
for payment till 31.3.2006 Rs. 12,000.
(2) Cheques deposited but not collected
by bank till 31.3.2006 Rs. 20,000.

Fundamentals Of Accounting: 20
Bank Reconciliation Statement
 Continued:
(3) Interest on term-loan Rs. 10,000 debited by
bank on 31.3.2006 but not accounted in
Mukesh’s book.
(4) Bank charges Rs. 250 was debited by bank
during March, 2006 but accounted in the books
of Mukesh on 4.4.2006.
(5) An amount of Rs. 1,00,000 representing
collection of Murukesh’s cheque was wrongly
credited to the account of Mukesh by the bank
in their bank statement.

Fundamentals Of Accounting: 21
Bank Reconciliation Statement
 Answer 5
Solution: In the books of Mukesh
Bank Reconciliation Statement as on 31.3.2006

Particulars Details Amount

Rs.
Overdraft as per cash book 5,000
Add: Cheques deposited in bank but not collected and
credited by bank till 31.3.2006 20,000
Interest on term loan not accounted in books 10,000
Bank charges not accounted in books 250 30,250
35,250

Less: Cheques issued but not presented for payment till 12,000
31.3.2006 23,250

1,00,000
Less: Erroneous credit by bank to Mukesh’s account 76,750
Balance as per bank statement
Fundamentals Of Accounting: 22
Bank Reconciliation Statement
 Illustration 6

From the following information (as on 31.3.2006), prepare a bank

reconciliation statement after making necessary amendments in the
cash book.
Amount (Rs.)

Bank balances as per cash book (Dr.) 3,25,000

Cheques deposited, but not yet credited 4,47,500
Cheques issued but not yet presented for payment 3,56,200
Bank charges debited bank but not recorded in cash-boo 1,250
Dividend directly collected by the bank 12,500

Fundamentals Of Accounting: 23
Bank Reconciliation Statement
 Continued:

Insurance premium paid by bank as per

standing instruction not intimated 15,900
Cash sales wrongly recorded in the Bank
column of the cash-book 25,500
Customer’s cheque dishonoured by bank
not recorded in the cash-book. 13,000
Wrong credit given by bank 15,000
Also show the bank balance that will appear in the trial balance as
on 31.3.2006

Fundamentals Of Accounting: 24
Bank Reconciliation Statement
Solution: Answer 6
Cash Book as on 31.3.2006
(after making necessary amendments)
Dr. Cr.
Particulars Amount Particulars Amount Rs.
Rs.
To Balance b/d 3,25,000 By Bank charges 1,250
To Dividend 12,500 By Insurance premium 15,900
By Cash sales (wrongly 25,500
recorded) 13,000
By Debtors (cheque 2,81,850
3,37,500 dishonoured) 3,37,500
By Balance c/d

Particulars Details Rs. Amount Rs.

Bank balance as per cash book 2,81,850
Add: Cheques issued but not yet presented for payment 3,56,200
Wrongly credit given by bank 15,000 3,71,200
6,53,050
Less: Cheques deposited but not yet credited by bank 4,47,500
Balance as per pass book 2,05,550

The bank balance of Rs. 2,81,850 will appear in the trial balance as on 31st March, 2006
Fundamentals Of Accounting: 25
Bank Reconciliation Statement
 Illustration 7
On 31st March, 2006 the pass-book of a trader showed a credit balance
of Rs. 1,565, but the pass book balance was different for the
following reasons from the cash book balance :
1. Cheques issued to ‘X’ for Rs. 600 and to ‘Y’ for Rs. 384 were not
yet presented for payment.
2. Bank charged Rs. 35 for bank charges and ‘Z’ directly deposited
Rs. 816 into the bank account, which were not entered in the cash
book.
3. Two cheques one from ‘A’ for Rs. 515 and another from ‘B’ for Rs.
1,250 were collected in the first week of April, 2006 although they
were banked on 25.03.2006.
4. Interest allowed by bank Rs. 45.
Prepare a bank reconciliation statement as on 31st March, 2006.

Fundamentals Of Accounting: 26
Bank Reconciliation Statement
 Answer 7
Bank Reconciliation Statement
as on 31st March 2006

Particulars Details Rs. Rs. Amount

Rs.
Credit balance as per pass book 1,565
Add: Cheques deposited into bank but not yet A:515
collected B: 1,250 1,765
35 1,800
Bank charges debited by the bank 3,365
X: 600
Less: Cheques issued but not presented for payment Y: 384 984
816
Direct deposit of cash in bank by Z 45 1,845
Interest allowed by the bank 1,520
Debit balance as per cash book
Fundamentals Of Accounting: 27
Bank Reconciliation Statement
 MCQ 1
1.When the balance as per Cash Book is the
starting point, direct deposits by customers
are :
a) added
b) subtracted;
c) not required to be adjusted
d) neither of the two

Fundamentals Of Accounting: 28
Bank Reconciliation Statement
 MCQ 2
2. A Bank Reconciliation Statement is a
a) part of Cash Book;
b) part of Bank Account;
c) part of financial statements,
d) none of the above.

Fundamentals Of Accounting: 29
Bank Reconciliation Statement
 MCQ 3
3.When balance as per Pass Book is the
starting point, interest allowed by Bank is
a) added
b) subtracted
c) not required to be adjusted
d) None of the above.

Fundamentals Of Accounting: 30
Bank Reconciliation Statement
 MCQ 4
4. A Bank Reconciliation statement is prepared
with the help of:
a) Bank statement and bank column of the
Cash Book.
b) Bank statement and cash column of the
Cash Book.
c) Bank column of the Cash Book and cash
column of the Cash Book
d) None of the above.

Fundamentals Of Accounting: 31
Bank Reconciliation Statement
 MCQ 5
5. Debit balance as per Cash Book of ABC
Enterprises as on 31.3.2006 is Rs. 1,500.
Cheques deposited but not cleared amounts to
Rs. 100 and Cheques issued but not presented
of Rs. 150. The bank allowed interest amounting
Rs. 50 and collected dividend Rs. 50 on behalf
of ABC Enterprises. Balance as per pass book
should be
a) 1,600. b) 1,450.
c) 1,850. d) 1,650.

Fundamentals Of Accounting: 32
Bank Reconciliation Statement
 MCQ 6
6. The cash book showed an overdraft of Rs. 1,500
as cash at bank, but the pass book made up to
the same date showed that cheques of Rs. 100,
Rs. 50 and Rs. 125 respectively had not been
presented for payments; and the cheque of Rs.
400 paid into account had not been cleared. The
balance as per the cash book will be
a) Rs. 1,100. b) Rs. 2,175.
c) Rs. 1,625. d) Rs. 1,375.

Fundamentals Of Accounting: 33
Bank Reconciliation Statement
 MCQ 7
7.When drawing up a Bank Reconciliation
Statement, if you start with a debit balance
as per the Bank Statement, the
unpresented cheques should be:
a) Added;
b) Deducted;
c) Not required to be adjusted.
d) None of the above.
Fundamentals Of Accounting: 34
Bank Reconciliation Statement
 MCQ 8
8. A debit balance in the depositor’s Cash
Book will be shown as:
a) a debit balance on the Bank
Statement.
b) a credit balance on the Bank
Statement.
c) an overdrawn balance on Bank
Statement.
d) None of the above.
Fundamentals Of Accounting: 35
Bank Reconciliation Statement
 MCQ 9
9.When preparing a Bank Reconciliation
Statement, if you start with a debit balance
as per the Cash Book, cheques issued but
not presented within the period should be:
a) Added;
b) Deducted;
c) not required to be adjusted
d) None of the above.
Fundamentals Of Accounting: 36
Bank Reconciliation Statement
 MCQ 10

10. When the balance as per Pass Book is

the starting point, direct payment by bank
are:
a) added in the bank reconciliation
statement
b) subtracted in the bank reconciliation
statement
c) Not required to be adjusted in the bank
reconciliation statement.
d) Neither of the above.
Fundamentals Of Accounting: 37
Bank Reconciliation Statement
 MCQ 11
11. When balance as per Cash Book is the
starting point, uncollected cheques are:
a) added in the bank reconciliation
statement
b) subtracted in the bank reconciliation
statement
c) ‘Not required to be adjusted in the bank
reconciliation statement
d) nether of the above.
Fundamentals Of Accounting: 38
Bank Reconciliation Statement
 MCQ 12
12. A Bank Reconciliation Statement is prepared
to know the causes for the difference between:
a) the balances as per cash column of Cash
Book and the Pass Book.
b) the balance as per bank column of Cash
Book and the Pass Book.
c) the balance as per bank column of Cash
Book and balances as per cash column of
Cash Book
d) Neither of the above.

Fundamentals Of Accounting: 39
Bank Reconciliation Statement
 MCQ 13
13. When the balance as per Pass Book is the
starting point, uncollected cheques are:
a) added in the bank reconciliation statement
b) subtracted in the bank reconciliation
statement
c) not required to be adjusted in the bank
reconciliation statement.
d) neither of the above.

Fundamentals Of Accounting: 40
Bank Reconciliation Statement
 MCQ 14
14. When balance as per Cash Book is the
starting point, interest charged by Bank is:
a) Added in the bank reconciliation statement
b) subtracted in the bank reconciliation
statement.
c) not required to be adjusted in the bank
reconciliation statement
d) neither of the above.

Fundamentals Of Accounting: 41
Bank Reconciliation Statement
 MCQ 15
Match the following items from column A with
column B
S.No. Column A Column B
1. Debit Balance in the Cash (a) Account holders
Book means
2. A Bank Reconciliation is (b) Overdraft as per
prepared by: Pass Book
3. A Bank Statement is a copy of: (c) Credit balance as
per Pass Book
4. Credit Balance in the cash (d) A customers
book means account in the Bank’s
book
Fundamentals Of Accounting: 42
Bank Reconciliation Statement
 MCQ 16
Choose the correct answer (more than one)
• The difference in the balances of both the
cash-book and the pass-book can be because
of
a) errors in recording the entries either in the
cash-book or pass-book.
b) same entry recorded in either of the book
earlier and in the other book later
c)debit balance of cash book is the credit
balance of pass-book.
d) None of the above.

Fundamentals Of Accounting: 43
Bank Reconciliation Statement
 MCQ 17
• Direct payment to the third party on behalf of the
account holder is entered in
a) the cash-book when the amount is paid by
the bank
b) the cash-book when the entry is posted in
the pass-book
c) the pass-book when the amount is paid by
the bank
d) the pass-book when the entry is posted in
the pass-book

Fundamentals Of Accounting: 44
Bank Reconciliation Statement
 MCQ 18
• Payment done by the account holder through
issuing a cheque is entered in
a) the pass-book at the time of issuing the
cheque
b) the cash-book at the time of presenting the
cheque to the bank for payment
c) the pass-book at the time of presenting the
cheque to the bank for payment
d) the cash-book at the time of issuing the
cheque

Fundamentals Of Accounting: 45
Bank Reconciliation Statement
 MCQ 19
• Following are the salient features of bank
reconciliation statement:
a) Any undue delay in the clearance of cheques
will be shown up by the reconciliation
b) Reconciliation statement will help in finding
the person doing any fraud
c) Reconciliation is done by the bankers
d) it helps in finding out the actual position of
the bank balance.

Fundamentals Of Accounting: 46
Bank Reconciliation Statement
 THE END

Bank Reconciliation Statement