Quick Revision Notes: Bank Reconciliation Statement (BRS)

Class 11 - Accountancy (MP Board)

### Concept 1: Introduction to Bank Reconciliation Statement (BRS)

• What is a Bank Reconciliation Statement? A statement prepared by the business entity to reconcile the bank balance as per the Cash Book with the bank balance as per the Pass Book by showing the causes of differences.
• Cash Book (Bank Column): Maintained by the business/account holder to record all bank transactions.
  • Debit Balance: Favorable balance (Bank Balance / Deposit).
  • Credit Balance: Overdraft (Bank Overdraft / Withdrawals in excess).
• Pass Book: A copy of the customer's account maintained by the bank.
  • Credit Balance: Favorable balance (Deposit as per Bank).
  • Debit Balance: Overdraft.

### Concept 2: Why Does the Difference Arise? (Causes of Disagreement)

The differences between the Cash Book and Pass Book balances generally arise due to two main reasons:

1. Timing Differences in Recording Transactions:
   • Cheques issued but not yet presented for payment.
   • Cheques paid into the bank (deposited) but not yet collected/cleared.
2. Direct Transactions Made by the Bank:
   • Interest allowed by the bank.
   • Bank charges, commission, and GST charged by the bank.
   • Direct payment made by the bank on behalf of the customer (e.g., insurance premium, rent).
   • Direct deposit by a customer into the bank account.
   • Interest and dividends collected by the bank.
3. Errors and Omissions:
   • Errors committed in recording amounts in the Cash Book or Pass Book.

### Concept 3: Standard Rules for Adjustment (Favorable Balances)

When starting with a Debit Balance as per Cash Book or a Credit Balance as per Pass Book, follow these basic rules to find the final balance:

### Key Formulas & Quick Summary Table

To find the required balance, use the following direction table based on the Starting Point:

1. Starting with Cash Book Balance

• Debit Balance as per Cash Book (Favorable):

  • ADD: Cheques issued but not yet presented, Income collected by bank, Direct deposits by customers, Errors of excess debit in Cash Book.
  • LESS: Cheques deposited/paid into bank but not cleared, Bank charges/commission, Direct payments made by bank, Errors of excess credit in Cash Book.
  • Result = Credit Balance as per Pass Book (Favorable)

• Credit Balance as per Cash Book (Bank Overdraft):

  • Reverse all the rules applied to a Favorable Cash Book balance.
  • ADD: Cheques deposited but not cleared, Bank charges, Direct payments by bank.
  • LESS: Cheques issued but not presented, Direct deposits by customers.
  • Result = Debit Balance as per Pass Book (Bank Overdraft)

2. Starting with Pass Book Balance

• Credit Balance as per Pass Book (Favorable):

  • Reverse the rules of Cash Book Favorable balance.
  • ADD: Cheques deposited but not cleared, Bank charges, Direct payments by bank.
  • LESS: Cheques issued but not presented, Direct deposits by customers, Interest allowed by bank.
  • Result = Debit Balance as per Cash Book (Favorable)

• Debit Balance as per Pass Book (Bank Overdraft):

  • Follow rules similar to Cash Book Overdraft.
  • ADD: Cheques issued but not presented, Interest allowed by bank.
  • LESS: Cheques deposited but not cleared, Bank charges, Direct payments by bank.
  • Result = Credit Balance as per Cash Book (Bank Overdraft)

### Important Exam Tips for MP Board Students

1. Identify the Starting Point: Always read the first line of the numerical problem carefully to check whether the starting balance is from the Cash Book or the Pass Book, and whether it is Favorable or an Overdraft.
2. Mental Check (The Seesaw Method): Assume the starting book is a seesaw. If an event makes the starting book go up compared to the other, you must do the opposite (Subtract/Less) to match it, or add if it went down.
3. Format of BRS: Always draw the proper format with columns:
   • Particulars
   • Plus Items (+ Amount in Rs.)
   • Minus Items (- Amount in Rs.)
4. Final Answer: Clearly state the resulting balance at the end (e.g., "Balance as per Pass Book" or "Overdraft as per Cash Book").