BANK RECONCILIATION STATEMENT

Takshila Learning Learn anything anywhere

Visit: http://www.takshilalearning.comCall: +91-8800999280

Statement prepared by the Business entity,

Reconciling/Matching the bank balance as per the cash book(Bank Column) & the Pass

book.

find out the differences between the balances & nullify them

BRS is prepared by the business entity

Meaning & Concept

The Cash Book is prepared by the business entity

Pass book/Bank Statement is prepared by the bank to have a record of the customer’s banking transactions.

Cash V/s Pass Book

BRS IS NOT THE PART OF THE ACCOUNTING PROCESS/FINANCIAL STATEMENTS.

IT IS PREPARED AT A PARTICULAR DATE AS A PART OF CASH BOOK

NOT MANDATORY TO BE PREPARED, VOLUNTARY FOR MATCHING THE BALANCES OF BOTH BOOKS

BRS

Bring out errors in Cash book/Pass book

Detection of Undue delay by the bank

Discourages any manipulation by Accountant

Finding out actual position of bank balance

Importance

Timing differences : Differences due to different treatments in Cash & Pass book.

(on different dates)

Other differences : Difference due to errors in Cash book.

Reasons of Differences

Cheque deposited but not cleared

Cheque issued but not presented for payment

Bank Charges/Interest debited/credited in bank account.

Direct payment/receipt by bank

Examples of Timing Differences

Transaction not recorded/twice recorded in cash book.

Any other clerical mistake( wrong amount, wrong casting, etc) in cash

book.

Other Differences

CASH BOOK DEBIT : FAVOURABLE/POSITIVE BALANCE

CREDIT : UNFAVORABLE/NEGATIVE/OVERDRAFT

PASS BOOK

DEBIT : UNFAVORABLE/OVERDRAFT/NEGATIVE

CREDIT : POSITIVE/FAVOURABLE

Balances

1) Without Adjusted Cash Book ( all changes are done in BRS )

2) With Adjusted Cash Book (the errors of cash book are rectified in adjusted Cash book & the timing differences in BRS from the rectified cash balance)

Note : Adjustments done in Adjusted Cash book not to be again treated in BRS.

Techniques of reconciliation

While preparing BRS, the changes (cancellation of the differences) are:

• to be done in the book from which we have started

• Keeping in mind the treatment done of the same transaction in the other book.

BRS- Basic Idea

If the Debit balance as per Cash book (as on 31/12/14) is ` 65,000

a) Cheque of `15,000 was deposited in bank but not cleared.

b) A cheque of `12,000 was issued but not presented for payment.

c) Bank charges of `150 was debited.d) Bank interest of `1600 was credited to the

account.e) A dividend of `2,000 was received by the

bank from ABC company.

Illustration

Particulars Plus (+) Minus (-)

Format

Q.1. A Bank Reconciliation Statement is prepared to know the causes for the difference between:

MCQs

The balances as per cash column of Cash Book and the Pass Book

The balance as per bank column of Cash Book and the Pass Book.

T The balance as per bank column of Cash Book and balances as per cash column of Cash Book

None of the above.

B

Q.2. Debit Balance as per Cash Book: ` 2,000, Cheques deposited but not cleared: ` 100, Cheques issued but not presented: ` 150, Bank allowed interest: ` 50, Bank collected dividend ` 50. Balance as per Pass Book will be:

MCQs

` 2,100

` 1,950

` 2,350

` 2,150

D

Q.3. Under bank reconciliation statement, while adjusting the cash book

MCQs

All the errors and omissions in the cashbook are taken into consideration

All the errors and omissions in the passbook are taken into consideration

Delays in recording in the passbook due to difference in timing are taken into consideration

All of the above

A

Q.4. While preparing BRS, Starting with over draft balance of cash book, a cheque of ` 5,500 deposited in bank and duly credited in pass book, but not recorded in cash book ____ in B.R.S

MCQs

` 5500 will be added

` 5500 will be subtracted

` 11000 will be added

` 11000 will be subtracted

B

Q.5. Bank Overdraft as per Cash Book is ` 10,500Interest debited by bank ` 3,500 for which advice was not received by account holder.Cheques deposited but not credited by bank ` 7,500.Cheques issued but not yet presented ` 9,500.What is the Overdraft amount as per pass book?

MCQs

` 12,000

` 16,000

` 5,000

` 9,000

A

Q.6. When preparing a Bank Reconciliation Statement if you start with balance as per Pass Book, then cheques paid by bank recorded twice in Pass Book ` 1050 will be

MCQs

Added

Deducted

Not required to be adjusted

None of the three

A

Q.7. When money is withdraw from bank ,the bank

MCQs

Credits customer’s a/c

Debits customer’s A/c

Credits and debits customer’s a/c

None of these

B

Q.8. The total payment side of Cash book is Rs. 700 short , if Bank Reconciliation statement is started with passbook (overdraft )balance then

MCQs

Rs. 700 will be less

Rs. 700 will be added

Same balance as per cash book

None of these

A

Q.9. Mr. Y presented three cheques of Rs.3000,Rs.4500 and Rs.3600 with the bank on 28th March 2005. Out of these cheques amounting to Rs.4500and Rs.3000 were shown in the pass book in the month of April 2005. while reconciling the balance on 31-03-2005 which of these cheques would be taken in reconciliation

MCQs

Rs.3600

Rs.3000

Rs.4500 and Rs.3000

Rs.3600 and Rs.3000

C

Q.10. overdraft as per Pass book is given Rs. 10,000Cheques deposited in bank but not recorded in cash book Rs. 100 Cheque drawn not presented for payment Rs. 6,000 Bank charges recorded twice in Cash book Rs. 30 Overdraft as per cash book will be

MCQs

Rs.16,000

Rs.16,130

Rs. 15,000

None of the three

B