Bank Reconciliation Statements


• 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.

Importance of BRS

• Errors which may have been committed

• Undue delay in clearance of cheques

• Discourages staff from embezzlement

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

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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.
(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.

Bank Reconciliation Answer


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