Bank Reconciliation Statement — Class 11 (Accountancy)
Your own record (the cash book) says you have ₹50,000 in the bank; the bank's statement (passbook) says ₹47,000. Neither is wrong — they simply recorded some items at different times. A Bank Reconciliation Statement explains the gap and proves both records are correct. This is a favourite, fully-scorable exam problem.
1. Two records of the same account
- Cash book (bank column) — the firm's own record of its bank transactions.
- Passbook / bank statement — the bank's record of the same account (from the bank's point of view, so it is a mirror: a deposit is a credit in the passbook).
On any date the two balances often differ. A Bank Reconciliation Statement (BRS) reconciles them by listing the causes of difference.
2. Reasons for the difference
A. Timing differences (most common):
- Cheques issued but not yet presented for payment — cash book already reduced, bank not yet.
- Cheques deposited but not yet cleared/credited — cash book already increased, bank not yet.
B. Entries made by the bank but not yet in the cash book: 3. Bank charges / interest debited by the bank. 4. Interest / dividends collected by the bank on the firm's behalf. 5. Direct payments by the bank (standing instructions) and direct deposits by customers.
C. Errors in the cash book or by the bank.
3. Logic of reconciliation
Because the passbook is the bank's view (opposite sign), an item that increases the cash book balance often decreases the difference with the passbook, and vice versa. The safe method: start with one balance, adjust for each item, and arrive at the other balance.
Rule of thumb (starting from favourable cash book balance, i.e. debit balance):
- Add: cheques issued but not presented; amounts directly credited by bank (interest/dividend collected); direct deposits by customers.
- Less: cheques deposited but not yet credited; bank charges/interest debited; direct payments by bank.
The adjusted figure equals the passbook balance. (Reverse the treatment if you start from the passbook, or if the balance is an overdraft.)
4. Worked example
Cash book (bank) balance = ₹50,000 (Dr, favourable).
- Cheques issued but not presented ₹8,000 → add.
- Cheques deposited not yet credited ₹6,000 → less.
- Bank charges ₹500 → less.
- Interest credited by bank ₹1,500 → add.
BRS: 50,000 + 8,000 − 6,000 − 500 + 1,500 = ₹53,000 = passbook balance (Cr).
5. Overdraft and importance
When the bank balance is an overdraft (the firm owes the bank), it is a credit balance in the cash book / debit in the passbook; the add/less treatment is reversed.
A BRS is useful because it: detects errors and delays, discovers items the firm hadn't recorded (charges, interest), checks the bank's accuracy, and updates the cash book for genuine items before finalising accounts.
6. Closing thought
A BRS reconciles the cash book and passbook by explaining timing differences, bank-made entries and errors. Learn the reasons, the add/less rule from a favourable cash-book balance (and its reversal for overdraft), and always show a neat statement. In the board exam a full BRS is a high-certainty problem worth 4–6 marks.
