GROUP - 11

Bank Reconciliation Statement

• CIA ( Continuous Internal Assessment ) 1

GROUP MEMBERS

• Shivang Mukut
• Shriyanshu Padhi
• Varshita Papini
• Shikhar Bhardwaj
• Payal Krishan
 Accounting Terms
Before introduction to the Bank Reconciliation Statements , we need to understand
important accounting terms like PASS BOOK and CASH BOOK. So to understand the
concepts more clearly while studying BRS

1. Pass Book : A Ledger or book on which Depositor at the Bank records all
transactions IN one’s account , such as Deposits , Withdrawal , and Interest
payments. It is also called a bankbook .

2. Cash Book : It is a book used to record receipts and payments of cash. It works as a
book of original entry as well as ledger account. Its a substitute for cash account in ledger
. And entries are first Recorded in cash book and then it is posted on relevant ledger
accounts.

By- Shivang Mukut

 Necessity
• Cash Book is necessary for preparing because number of cash transactions is quite
large in every business and its quiet unpractical and inconvenient to record all cash
transactions . Therefore it is necessary to maintain it. It enables businessmen to know
the balance of cash in hand and at bank at any point of time.
• Pass Book it is used for accounts with low transactions volume , such as saving
account. A complete copy of all transactions is kept within passbook so you can easily
track all your deposits , withdrawals , and interest earned.
 Introduction
• Bank Reconciliation Statement ( BRS) is a statement prepared by the account holder
on particular date to reconcile to bank balance as per cash Book with balance as per
Bank statement or Bank Pass book showing entries because of which differences
between two balances exist.
• Amount deposited into bank is recorded in the bank column of the two column Cash
Book on debit side while withdraws and cheques are recorded on credit side.
• Debit entries in cash book are shown on Credit side of Bank statement or Bank pass
book. While credit entries in cash book are shown on Debit side of Bank statement or
pass book.
 Introduction
• The statement outlines the deposits, withdrawls, and other activities affecting a bank
account for a specific period.
• The Purpose of preparing a bank reconciliation statement is to detect any
discrepancies between the accounting records of entity and bank besides those due to
normal timing differences.
• One should remember its not part of Book Keeping but its method to ensure that there
are no errors or omissions in recording bank transactions in the cash book.
 Need and Importance of BRS

• It brings out the errors (if any) committed in the cash book or the bank statement .
• Undue delay in the clearance of cheques deposited is known from reconciliation.
• Regular reconciliation discourages embezzlements.
• It helps in verifying the accuracy of entries recording the cash books.
• It shows the actual verified bank balance.

By – Shriyanshu Padhi
Reasons of difference of balance between cashbook and passbook balances.

• 1. Difference due to timing- There is always a time gap between recording a

transaction in the books of account and it being recorded by the bank, such difference
in time leads to difference of balance between the two books.
• 2. Transactions recorded by the bank- sometimes certain transactions are recorded
by the bank which become known to the account holder when he receives the bank
pass book , ex- interest charged or allowed by the bank , bank charges.
• 3.Errors- Errors may be committed by the bank or the account holder and these errors
result in difference in balances of cash book or the bank statement/passbook.
 1.Difference due to timing
• A.cheques issued but not yet presented for payment-cheques issued for payment is
recorded in the cash book immediately on it being issued. But the bank records the
entry when the cheque is presented to it for payment. Thus, there is a few days of gap
which leads to difference in amounts.
• B.cheques deposited into the bank but not yet cleared- cheques deposited into the
bank are recorded in the bank column on the receipts. i.e debit side of cash book on the
day of deposit , but the bank credits the account when it had received the payment from
the other bank , so the gap between the days of actual deposit and receiving the amount
leads to difference in the balance.
 2.Transactions recorded by the bank

• A.interest credited by the bank but not recorded in the cash book- when the bank
credits the interest to the account holders bank account , but it will be recorded by the
person only when it is known to him. This leads to difference in amounts.
• B.Bank charges and interest charged by bank but not recorded in the cash book-
bank charges and interest is charged by bank for maintaining current accounts and for
providing overdraft facilities respectively , the bank debits the account of the person ,
but it is recorded in the cash book only when it comes to the knowledge of the account
holder
• C.interest and dividends collected by the bank- bank collects interest and dividend
on behalf of the account holder and credits them to the bank book , but the customer
records it when they receive the pass book
• D.direct payments by bank - bank may have been given instructions for payment
(ex-insurance premium) . When the bank makes the payment it debits the account
holders account .it is recorded in the books of account of the person only when he gets
the bank pass book.
• Slide bullet text
• E.direct deposit into bank by a customer- If payment is received by the bank
directly , it will record it in the account holder’s account. The account holder will
record it at a late date when he receives the bank statement .
• F.Dishonour of a bill discounted with the bank- If the bank does not collect the
payment against bills of exchange or promissory notes discounted by it , it will debit
the account holder’s account along with charges that it may have incurred .so the
account holder gets to know about it on a later date , when they get the bank pass
book.
 3.Errors

• A. Errors and omissions- errors or omissions either in the cash book or in the bank
statement/pass book is another reason for difference between the balances as per the
cash book and the bank pass book . Ex. A cheque deposited for certain amount could
be mistyped in the bank statement