BANK RECONCILIATION

STATEMENT
 Bank Reconciliation Statement is a statement prepared by the
account holder on a particular date to reconcile the bank balance as
per Cash Book with the balance as per Bank Statement or Bank Pass
Book showing entries because of which differences between the
two balances exist.
 NEED FOR BANK RECONCILIATION STATEMENT

The Debit entries

Pass Book /Bank Transactions of in the Cash Book Since the
Statement is a deposits and are reflected on transactions are
copy of the withdrawals the Credit side of same, balances
account of the during the the Pass Book and shown by the
customer period are Credit entries in two books at the
maintained by the recorded both the Cash Book are end of the
Bank in its books in Cash Book reflected on the period should
of account. and Pass Book. Debit side of the normally agree.
Pass Book.
 NEED FOR BANK RECONCILICATION STATEMENT

This statement is not a

The statement part of Book Keeping
But, many times, prepared to show the but a method to
these two balances reasons or causes of ensure that there are
differ due to errors or difference is called no errors or omissions
any other reason. Bank Reconciliation in recording bank
Statement. transactions in the
Cash Book.
 IMPORTANCE OF BANK RECONCILIATION STATEMENT

Brings out the errors, if

any, in the Cash Book or Discourages embezzlements
Pass Book.

Undue delay in clearance of

cheques deposited is known.

Helps in verifying the Shows the actual bank

accuracy of entries in the balance.
Cash Book.
 REASONS FOR DIFFERENCES

DIFFERENCES DUE TO TIMING

Cheques issued but not

Cheques deposited into
yet presented for
bank but not yet cleared
payment

Cheque of Rs. 20,000 issued on 25th April but presented Cheque of Rs. 10,000 deposited on 20th January but cleared
for payment on 3rd May. This will be recorded in the Cash and credited 2nd February. This will be recorded in the Cash
Book on 25th April but in the Pass Book on 3rd May. So, Book on 20th January but in the Pass Book on 2nd February. So,
on 30th April, if compared, both the books will show on 30th January, if compared, both the books will show
difference. difference.
 TRANSACTIONS RECORDED BY BANK
Bank charges, Interest
Interest credited by the
charges by Bank but not
Bank but not recorded in
recorded in Cash Book
Cash Book

Interest and Dividends collected

Direct payments by the Bank
by the Bank

Direct deposit into Bank by a Bills collected by the Bank on

customer behalf of the customer
Dishonour of a Bill discounted
with the Bank
 ERRORS and OMISSIONS

Errors and Omissions either in the Cash Book or in the Pass Book will
also cause difference between the balances as per Cash Book and
Bank Pass Book.

Amount of cheque deposited Overcasting of the bank column in

wrongly recorded in the Cash Book the Cash Book

Cheque collected on behalf of one

Undercasting of the Bank Pass Book customer credited to the account of
another customer by the bank.
BANK RECONCILICATION PROCESS
 BALANCES IN BOTH THE BOOKS

CASH BOOK PASS BOOK

Dr. Cr. Dr. Cr.

Debit balance – Favourable Credit balance – Favourable

Credit balance – Unfavourable / Debit balance – Unfavourable /
Overdraft Overdraft
 IMPORTANT POINTS TO BE NOTED

Balance as per Cash Book means balance as per the Bank column of the Cash Book.

Both Cash Book and Pass Book are compared on the date on which the statement is
prepared.

The transactions which are recorded in one book but missing in the other book on
that particular date are considered for preparing the statement.

Debit balance in Cash Book refers to the amount lying deposited in bank which is an
Asset of the firm whereas Credit balance is Overdraft which is Liability.

Debit balance in Pass Book refers to Overdraft which is Liability and Credit balance is
amount lying deposited in bank which is an Asset of the firm.
Bank Reconciliation Statement is prepared by starting with either Cash Book balance or Pass Book
balance.

The entries that cause the differences are determined.

Then the starting balance is adjusted by noting how the balance would have changed if same
entries are recorded in the two books.

A transaction which is correctly recorded in both Cash Book and Bank Pass Book within the date
of preparing the statement is not considered while preparing the statement.

When the statement is prepared by starting with Cash Book balance, the end result will be the
balance shown by the Bank Pass Book.

When the statement is prepared by starting with Bank Pass Book balance, the end result will be
the balance shown by the Cash Book.
 FORMAT
BANK RECONCILIATION STATEMENT AS ON …………

PARTICULARS PLUS ITEMS MINUS ITEMS

(Rs.) (Rs.)

Dr. / Cr. Balance as per Cash Book

Dr. / Cr. Balance as per Pass Book

Dr. / Cr. Balance as per Pass Book

Dr. / Cr. Balance as per Cash Book
 DEBIT (Favourable) balance as per Cash Book
Q4; Pg. 12.44 Bank Reconciliation Statement as on 30th June, 2019
PARTICULARS PLUS ITEMS MINUS ITEMS
(Rs.) (Rs.)
Dr. Balance as per Cash Book 12,000

Cheques paid into bank but not yet credited by the bank. 1,500
Under casting of Receipts column of the Cash book 200

Direct deposit by a customer not entered in Cash book 3,000

Cheques issued but not presented for payment 2,200

Interest credited by bank 330

Bank charges charged by bank 60

Cr. Balance as per Pass Book 16,170

__________ __________
17,730 17,730
 CREDIT (Favourable) balance as per Pass Book
Q10; Pg. 12.45 Bank Reconciliation Statement as on 31st March, 2011
PARTICULARS PLUS ITEMS MINUS ITEMS
(Rs.) (Rs.)
Cr. Balance as per Pass Book 6,000

Cheques issued but not presented for payment. 600

Cheque deposited but not credited by the bank 800

Interest credited by bank 85

Cheque deposited but omitted in the Cash book 510

Dr. Balance as per Cash Book 5,605

___________ __________
6,800 6,800
 CREDIT (Unfavourable) balance as per Cash Book
Q15; Pg. 12.47 Bank Reconciliation Statement as on 31st March, 2019
PARTICULARS PLUS ITEMS MINUS ITEMS
(Rs.) (Rs.)
Cr. (Overdraft) Balance as per Cash Book 40,500

Cheques issued but not presented for payment. 5,000

Post dated cheque debited in the bank column of Cash 900

book

Cheque deposited but not yet collected 10,200

Cheque dishonoured 4,000

Bill retired by bank under rebate but full amount

credited in the bank column of Cash book 150

Dr. (Overdraft) Balance as per Pass Book 50,450

__________ __________
 DEBIT (Unfavourable) balance as per Pass Book
Q19; Pg. 12.48 Bank Reconciliation Statement as on 31st March, 2019
PARTICULARS PLUS ITEMS MINUS ITEMS
(Rs.) (Rs.)
Dr. (Overdraft) Balance as per Pass Book 2,500

Cheques issued but not presented for payment. 2,000

Cheque issued but omitted in the Cash book 1,000

Cheque deposited but not yet collected 500

Discounted bill of exchange dishonoured 1,000

Cheque debited in Cash book but omitted to be banked 500

Interest allowed by bank but not recorded in the Cash

200
book
Dr. (Overdraft) Balance as per Cash Book 1,700
__________ __________
This statement shows the reasons or
causes of difference in the balances It is prepared by the Account Holder.
of Cash Book and Pass Book.

It is not a part of Book Keeping.

Pass Book / Bank Statement is a

copy of the account of the account
holder in the books of the bank.
It helps in verifying the accuracy of
entries in the Cash Book.