AccountancyBank reconciliation statement (BRS), solved
Your cash book says ₹50,000 is in the bank. The bank says ₹54,000. Both can be right. The reconciliation statement explains the gap.
Two records of the same account
The business records its bank transactions in the bank column of the cash book. The bank records the same account in its own books and sends a copy: the bank statement or pass book. The two are mirror images. Money deposited is a debit in the cash book (the bank is our asset) and a credit in the bank's books (we are the bank's liability). So a debit balance in the cash book corresponds to a credit balance in the pass book.
On any date the two balances often differ. A bank reconciliation statement (BRS) lists the causes of the difference and shows that, once they are allowed for, the two records agree.
Why the balances differ
1. Timing differences
- Cheques issued but not yet presented. We credited the cash book on issuing the cheque; the bank pays only when the payee presents it. Until then the bank shows more.
- Cheques deposited but not yet collected. We debited the cash book on depositing; the bank credits only on clearing. Until then the bank shows less.
2. Entries made by the bank that we have not yet recorded
- Bank charges and interest on overdraft debited by the bank.
- Interest allowed by the bank.
- Amounts paid directly into the bank by customers.
- Payments made by the bank on standing instructions, such as insurance premium.
- Dividend or interest collected by the bank.
- Cheques or bills dishonoured.
3. Errors
Either the business or the bank may make an error: a wrong amount, an entry on the wrong side, an entry left out, or a wrong total.
The rule for adding and subtracting
Start with the balance of one book and ask of each item: "Compared with my starting book, does the other book show more or less because of this?" If more, add. If less, subtract.
| Starting from a debit balance as per cash book | Treatment |
|---|---|
| Cheques issued but not presented | Add |
| Interest credited by bank; direct deposits by customers; dividend collected | Add |
| Cheques deposited but not cleared | Subtract |
| Bank charges; interest on overdraft; payments on standing instructions | Subtract |
| Deposited cheque dishonoured, not entered in cash book | Subtract |
Starting from the pass book balance, every sign is reversed. Starting from an overdraft, every sign is reversed again.
Solved example 1
On 31 March 2026 the cash book of Sunrise Traders shows a bank balance of ₹50,000 (debit). On comparing it with the bank statement:
- Cheques issued for ₹12,000 have not been presented for payment.
- Cheques of ₹8,500 deposited on 30 March have not been collected.
- Bank charges of ₹300 are not entered in the cash book.
- The bank has credited interest of ₹1,200.
- A customer paid ₹6,000 directly into the bank.
- A deposited cheque of ₹4,000 was dishonoured; no entry has been made in the cash book.
- The bank paid insurance premium of ₹2,400 on standing instructions.
| Particulars | ₹ | ₹ |
|---|---|---|
| Balance as per cash book (Dr.) | 50,000 | |
| Add: Cheques issued but not presented | 12,000 | |
| Interest credited by bank | 1,200 | |
| Direct deposit by customer | 6,000 | 19,200 |
| 69,200 | ||
| Less: Cheques deposited but not collected | 8,500 | |
| Bank charges | 300 | |
| Cheque dishonoured, not entered | 4,000 | |
| Insurance premium paid by bank | 2,400 | 15,200 |
| Balance as per pass book (Cr.) | 54,000 |
The amended cash book method
Items 3 to 7 are real transactions that the business has simply not recorded yet. The better practice is to enter them in the cash book first, find the corrected balance, and then reconcile only the timing differences.
| Date | Particulars | ₹ | Date | Particulars | ₹ |
|---|---|---|---|---|---|
| Mar 31 | To Balance b/d | 50,000 | Mar 31 | By Bank Charges A/c | 300 |
| Mar 31 | To Interest A/c | 1,200 | Mar 31 | By Customer (cheque dishonoured) | 4,000 |
| Mar 31 | To Customer (direct deposit) | 6,000 | Mar 31 | By Insurance A/c | 2,400 |
| By Balance c/d | 50,500 | ||||
| 57,200 | 57,200 |
| Particulars | ₹ | ₹ |
|---|---|---|
| Balance as per amended cash book (Dr.) | 50,500 | |
| Add: Cheques issued but not presented | 12,000 | |
| 62,500 | ||
| Less: Cheques deposited but not collected | 8,500 | |
| Balance as per pass book (Cr.) | 54,000 |
Both methods end at ₹54,000. The balance sheet should show the amended figure, ₹50,500, as cash at bank, because that is the true balance once all known transactions are recorded.
Solved example 2: overdraft
The cash book of Malwa Agencies shows an overdraft of ₹20,000 (credit balance) on 30 June 2026. Cheques issued but not presented: ₹5,000. Cheques deposited but not credited: ₹9,000. Interest on overdraft debited by the bank, not in the cash book: ₹700. A customer deposited ₹3,000 directly.
| Particulars | ₹ | ₹ |
|---|---|---|
| Overdraft as per cash book (Cr.) | 20,000 | |
| Add: Cheques deposited but not credited | 9,000 | |
| Interest on overdraft debited by bank | 700 | 9,700 |
| 29,700 | ||
| Less: Cheques issued but not presented | 5,000 | |
| Direct deposit by customer | 3,000 | 8,000 |
| Overdraft as per pass book (Dr.) | 21,700 |
With an overdraft the logic is reversed: anything that makes the bank's figure of our debt larger is added.
Why prepare a BRS
- It finds errors in the cash book or by the bank.
- It shows delays in collecting cheques.
- It discourages fraud: money recorded as banked must actually reach the bank.
- It gives the true bank balance for the balance sheet.
Common mistakes
- Using the wrong sign because the starting balance was not noted carefully. Write at the top whether you start from cash book or pass book, and whether it is a favourable balance or an overdraft.
- Treating the date of issue as the date of payment. A cheque issued on 29 March and paid on 3 April is "not presented" on 31 March.
- Forgetting that a debit balance in the pass book means an overdraft.
Questions students ask
What is a bank reconciliation statement?
A statement prepared on a given date to explain the difference between the bank balance shown by the cash book and the balance shown by the bank statement.
Is a BRS part of the double entry system?
No. It is a statement, not an account. Only the corrections made in the amended cash book are part of the books.
Cheques issued but not presented: add or subtract?
Starting from a debit balance as per cash book, add them, because the bank has not yet paid them and so shows a higher balance.
More Class 11 topics
For study, and independent. These pages explain accountancy as it is generally taught in Class 11, Class 12 and B.Com courses in India, in our own words with our own examples, reviewed in November 2026. This site is not connected with NCERT, CBSE, ICAI or any board or university. Syllabuses change: follow your own board's or university's current syllabus and textbook. Nothing here is professional accounting, tax or legal advice.