Bank Reconciliation Statement for CA Foundation
Why the bank column of the cash book and the bank's pass book rarely agree on a given date, and how to reconcile them.
AccountingPaper 113 MCQs2 lessons2 flashcards3 memory tricks
Practise Bank Reconciliation Statement free
What you'll learn
- Why the two balances differ
Identify timing differences and errors between the cash book and pass book. - Preparing the BRS
Prepare a BRS starting from either balance, including overdrafts.
Concepts explained
Adjusting items in a BRS
Ask one question for each item: did it make the pass book balance higher or lower than the cash book? Higher → add (from the cash book side); lower → deduct.
What it means
- Pass book higher: cheques issued but not presented, interest or dividends credited by the bank, direct deposits.
- Pass book lower: cheques deposited but not credited, bank charges, direct payments, dishonoured cheques.
- Starting from the pass book balance, reverse every sign.
- Errors in either book are adjusted by their effect on the balance.
- Cash book Dr 15,000; issued not presented 3,000; deposited not credited 4,500; charges 150; interest 600
- 15,000 + 3,000 + 600 − 4,500 − 150
Answer: Pass book ₹13,950
- Customer paid ₹4,000 straight into the bank
- Pass book higher
Answer: Add ₹4,000 from the cash book side
Related terms
- Amended cash book: cash book corrected for pass-book-only items before the BRS
- Timing difference: both records right; just recorded on different dates
Exam tip: Never memorise a list of signs: ask 'which book is higher because of this item?'
Favourable balance vs overdraft
In the cash book, money in the bank is a debit balance; in the pass book, it is a credit balance. An overdraft is the reverse in both.
What it means
- Cash book Dr = favourable; cash book Cr = overdraft.
- Pass book Cr = favourable; pass book Dr = overdraft.
- Starting from an overdraft, items that reduce money increase the overdraft and vice versa.
- A negative answer means the balance has switched sides (favourable ↔ overdraft).
- Overdraft as per cash book ₹5,000; charges ₹200 not recorded
Answer: Overdraft as per pass book ₹5,200
- Cash book Dr ₹1,000; cheques deposited not credited ₹1,500
- 1,000 − 1,500 = −500
Answer: Overdraft of ₹500 as per pass book
Related terms
- Pass book: the bank's copy of your account
- Bank statement: same as the pass book for current accounts
Exam tip: Write 'Dr' or 'Cr' (or 'OD') next to every starting balance before you begin.
Why prepare a BRS
A BRS explains the difference between two correct-looking records on the same date, and catches errors and frauds in either.
What it means
- Prepared by the account holder, usually monthly.
- Most differences are timing differences that clear in a few days.
- Errors (double entry, wrong amount) need correction in the book that made them.
- Helps detect unauthorised withdrawals and missing deposits.
- Cheque issued on 30 March, presented on 3 April
Answer: Difference on 31 March only
- ₹540 cheque entered as ₹450 in the cash book
Answer: Correct the cash book; adjust ₹90 in the BRS
Related terms
- Internal control: checks that protect a business's money
- Standing instruction: bank pays regularly on the customer's behalf
Exam tip: A BRS is a statement, not an account: it is not part of the double-entry system.
Memory tricks
From cash book Dr balance: add cheques issued not presented; deduct cheques deposited not credited.
Cash book Dr balance = pass book Cr balance (money in bank).
Items recorded only in the pass book must be adjusted, then entered in the cash book.
Try 3 CA Foundation-style questions
Q1. Which of these causes a difference between the cash book and pass book because of timing, not an error?
- A cheque recorded twice in the cash book
- Bank wrongly debiting another customer's cheque to our account
- A cheque issued to a supplier that hasn't been presented yet
- Wrong totalling of the bank column
Show answer
Answer: (3) A cheque issued to a supplier that hasn't been presented yet
A cheque issued but not presented is a timing difference: both records are correct, the bank just hasn't paid it yet.
Q2. A bank reconciliation statement is prepared by
- the bank
- the statutory auditor only
- the account holder (the business)
- the Reserve Bank of India
Show answer
Answer: (3) the account holder (the business)
The business prepares the BRS to explain the difference between the bank column of its cash book and the bank's pass book (bank statement).
Q3. A customer deposited ₹4,000 directly into the firm's bank account; the firm hasn't recorded it. Starting from the cash book balance, it is
- deducted
- ignored
- deducted twice
- added
Show answer
Answer: (4) added
The bank has credited ₹4,000 that isn't in the cash book, so the pass book balance is higher: add it.
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