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
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.
File Size: 360.85kb