BANK RECONCILIATION STATEMENT (BRS)
DEFINITION: Bank reconciliation statement (BRS) is a statement prepared mainly to reconcile the difference between ‘bank balance’ shown by the cash book and the bank pass book.
BANK RECONCILIATION STATEMENT FORMAT:
Bank reconciliation statement as on …………………
PARTICULARS PLUS ITEMS (Rs.) MINUS ITEMS (Rs.) Dr. Balance (Favorable Balance) as per cash book xxxx Add: 1. Cheque issued or drawn but not yet presented for payment xxxx 2. Interest allowed by bank but not recorded in cash book xxxx 3. Amount directly deposited by the customers in our bank A/C xxxx 4. Interests or dividends collected by bank on trader's investments xxxx 5. Cheques paid into bank on trader's investments xxxx 6. Any wrong credit given by the bank in the passbook xxxx Less: 1. Cheques paid into bank for collection but not yet credited by bank xxxx 2. Cheques paid into bank for collection but dishonoured by the bank xxxx 3. Direct payment made by the bank according to the standing instructions to the customers xxxx 4. Bank charges and commission charged by the bank xxxx 5. Cheques issued but omitted to be recorded in the cash book xxxx 6. Any wrong debit by the bank in the pass book xxxx xxxxxxxxx xxxxxxxxx Cr. balance (favourable) as per pass book xxxx
Notes for BRS:
- In the above format, the BRS has been started from the debit balance of cash book. Therefore, the answer which will arrive will be the credit balance as per pass book.
- If instead of debit balance of cash book we start from credit balance of cash book, opening balance will be written on minus side and everything else will be the same as above. And the answer arrived will be the debit balance (overdraft) as per pass book.
- If instead of debit balance of cash book statement is started from debit balance (overdraft) of pass book, the opening balance will be written in minus items and all the entries will be reversed i.e., items shown in plus column will be shown in minus column and vice versa. The balance arrived at end will be credit balance (overdraft) as per cash book.
- If the BRS is started from credit balance (favorable) of pass book, the opening balance will be written in plus items and all the remaining entries will be same as in point no. 3 above. The balance arrived at end will be debit balance (favorable) as per cash book.
Here are some easy steps to prepare BRS:
- If cash book balance is given in the question, take the opposite balance – “Pass Book” as the correct balance. Hold it stable. We will not do any corrections in the stable balance. We will act according to it. All the corrections which are to be done will be done according to it.
- Whatever will be the effect of entries as per stable balance Just record it as it is.
For example – suppose we have wrongfully added some amount in pass book then we will add it ‘as it is’ in cash book balance. - Whatever will be the effect of entries as per unstable balance just reverse it.
For example – suppose we have wrongfully added some amount in cash book then we have to act according to stable balance which is pass book here, so accordingly we will subtract it. - After adding and subtracting items we get our desired results.
Let us discuss these points about BRS with the help of illustrations:
Q. On 31st March 2016, the bank balance as per Rajesh Chauhan’s cash book was Rs. 17,280 debit. On comparing the cash book with the pass book, following differences were found:
- Cheques for Rs. 8400 sent for collection have not been cleared by the bank so far
- Cheques issued but not yet presented for payment Rs. 5600
- There is a debit of Rs. 80 in the pass book for bank charges, but not recorded in the cash book
- Bank has credited Rs. 240 for interest in the pass book but these are also not recorded in the cash book
- A customer deposited Rs. 2000 direct in the bank but these were recorded only in pass book
- According to standing orders of Rajesh Chauhan, the bank has made the following payments by debiting his account:
I. Club Fees Rs. 500
II. Life Insurance premium Rs. 2500
These were not recorded in cash book
Prepare a BRS as on 31st March 2016.
Solution:
PARTICULARS | PLUS ITEMS (Rs.) | MINUS ITEMS (Rs.) |
Dr. Balance as per cash book | 17,280 |
|
Add: |
|
|
1. Cheques issued but not yet presented for payment | 5,600 |
|
2. Interest credited by bank but not recorded in cash book | 240 |
|
3. Direct deposit by a customer in our bank A/C | 2,000 |
|
Less: |
|
|
1. Cheques sent for collection but not yet cleared |
| 8,400 |
2. Bank charges debited in pass book but not yet entered in cash book |
| 80 |
3. Amount paid by bank on standing orders: Club Fees: |
|
|
| 25,120 | 11,480 |
|
|
|
Cr. balance as per pass book | 13,640 |
|
* Since we have started from Dr. balance as per cash book we arrived at cr. balance (favourable) as per pass book.
Explanation:
The balance given in question is as per cash book so, we take 'pass book balance' as our stable balance.
1. Since, cheques are sent for collection so, it must have been credited as per cash book which is unstable balance. We have earlier said that entries according to unstable balance are reversed so we will reverse it and we 'subtract it' or record it in 'minus items'
2. Cheques issued but not yet presented, it must have been subtracted as per cash book so we will reverse it and 'add it' or record it in 'plus items'
3. Since the charges are debited (minus) as per our stable balance, so we keep it as it is and show it in minus items
4. As per our stable balance Rs. 240 for interest is credited (added) so, we place it as it is in plus items
5. As per our stable balance “Pass Book” Rs. 2000 is directly deposited (added) or credited. So, plus items.
6. As per our stable balance, these charges:
a. Club Fees – Rs. 500
b. Life Insurance Premium – Rs. 2,500
are debited (subtracted), so we record it as it is in minus items.
After doing these steps, we arrived at our desired results. This was just an example, other problems can be done doing similar steps. All the best.
If stuck somewhere, then ask questions by tweeting us @FunLearnPortal with hashtag #AskKFDN.
JOIN CA CPT STATISTICS COURSE BY CLICKING HERE.
Kailasha Foundation – Bringing Solutions To You
Follow us on Facebook, Twitter, Instagram, LinkedIn for regular updates.
One Comment