Bank Reconciliation Statement Class 11 NCERT

Meaning and Purpose of Bank Reconciliation Statement

A Bank Reconciliation Statement is not a ledger account and it is not recorded in the books as a journal entry by itself. It is a statement prepared on a particular date to reconcile two independent records of the same bank transactions: the cash book maintained by the business and the pass book maintained by the bank. Differences arise mainly because of timing gaps, omissions or errors. For example, when a cheque is issued, the business immediately credits the cash book, but the bank reduces the balance only when the cheque is presented for payment. BRS helps detect mistakes, prevent fraud, confirm bank balance and present reliable accounting information.

Key Terms You Must Know

Cash Book Bank Column

The column in the cash book that records deposits into and withdrawals from the bank account from the business point of view.

Pass Book

A copy of the customer's bank account as maintained by the bank, showing deposits, withdrawals, charges and interest.

Favourable Balance

A debit balance as per cash book or credit balance as per pass book, meaning money is available in the bank.

Overdraft

A situation where withdrawals exceed deposits; it appears as credit balance in cash book and debit balance in pass book.

Unpresented Cheque

A cheque issued by the business and recorded in cash book, but not yet presented to the bank for payment.

Uncredited Cheque

A cheque deposited into bank and recorded in cash book, but not yet collected and credited by the bank.

How to Prepare a Bank Reconciliation Statement

1. Step 1: Identify the starting balance — Check whether the question starts with balance as per cash book or pass book, and whether it is favourable or overdraft. This decides the direction of adjustment.
2. Step 2: Understand which book already has the entry — Ask: has the transaction been recorded in cash book, pass book, both, or neither? A difference exists only when one book has recorded it and the other has not, or when one has recorded it wrongly.
3. Step 3: Apply the effect on the target balance — If starting from cash book, adjust items that explain why pass book is different. Cheques issued but not presented are added to favourable cash book balance. Cheques deposited but not collected are subtracted.
4. Step 4: Treat bank-only entries carefully — Bank charges, interest charged, direct payments by bank and dishonoured cheques usually reduce pass book balance but may not yet appear in cash book; direct deposits and interest allowed increase pass book balance.
5. Step 5: Recheck sign using common sense — After every adjustment, ask whether the bank balance should become higher or lower. This prevents mechanical sign errors, the most common mistake in BRS.

Worked Examples with Steps

• Example 1: From cash book favourable balance. Balance as per cash book is ₹20,000. Cheques issued ₹6,000 are not yet presented. Cheques deposited ₹4,500 are not yet collected. Bank charges ₹300 are not entered in cash book. Step 1: Start with cash book balance ₹20,000. Step 2: Add cheques issued but not presented because cash book has reduced balance but bank has not yet reduced it: +₹6,000. Step 3: Subtract cheques deposited but not collected because cash book has increased balance but bank has not yet increased it: -₹4,500. Step 4: Subtract bank charges because bank has reduced pass book but cash book has not: -₹300. Final answer: Balance as per pass book = ₹20,000 + ₹6,000 - ₹4,500 - ₹300 = ₹21,200.
• Example 2: From pass book favourable balance. Balance as per pass book is ₹35,000. Cheques deposited but not credited ₹8,000. Cheques issued but not presented ₹5,000. Interest credited by bank ₹700 not entered in cash book. Step 1: Start with pass book balance ₹35,000. Step 2: Add cheques deposited but not credited because cash book would be higher than pass book by this amount: +₹8,000. Step 3: Subtract cheques issued but not presented because cash book would be lower than pass book: -₹5,000. Step 4: Subtract bank interest credited because pass book has extra increase not yet in cash book: -₹700. Final answer: Balance as per cash book = ₹35,000 + ₹8,000 - ₹5,000 - ₹700 = ₹37,300.
• Example 3: Overdraft logic. Overdraft as per cash book is ₹12,000. A cheque of ₹3,000 issued is not presented. Bank charged interest on overdraft ₹500 not recorded in cash book. Step 1: Overdraft as per cash book means an unfavourable balance of ₹12,000. Step 2: Cheque issued but not presented makes pass book overdraft lower because bank has not paid it yet: subtract ₹3,000 from overdraft. Step 3: Interest charged by bank makes pass book overdraft higher: add ₹500. Final answer: Overdraft as per pass book = ₹12,000 - ₹3,000 + ₹500 = ₹9,500.

Board Exam Tips and Common Traps

Do not blindly memorise add and less rules. First identify the nature of balance: favourable or overdraft. A debit balance in cash book equals a credit balance in pass book, but overdraft reverses this logic. Also remember that BRS is normally prepared after updating the cash book for omitted bank charges, interest, direct deposits or dishonoured cheques if the question specifically asks for an adjusted cash book. If it asks only for BRS, show them as reconciliation items.

High-Scoring Points to Remember

• Cheques issued but not presented: cash book records payment first, so pass book balance is higher in a favourable balance case.
• Cheques deposited but not collected: cash book records receipt first, so pass book balance is lower in a favourable balance case.
• Bank charges, bank interest charged and dishonoured cheques reduce the balance as per pass book if not entered in cash book.
• Direct deposits by customers and interest allowed by bank increase pass book balance if not entered in cash book.
• BRS explains differences; it does not itself correct errors unless an adjusted cash book is prepared separately.
• Always write the date of preparation because reconciliation is valid for a specific date.

Practice Questions with Solutions

• Q: Balance as per cash book is ₹18,500. Cheques issued but not presented are ₹2,400. Cheques deposited but not collected are ₹3,100. Bank charges ₹200 are not recorded in cash book. Find balance as per pass book. A: Step 1: Start with favourable cash book balance = ₹18,500. Step 2: Add cheques issued but not presented = ₹18,500 + ₹2,400 = ₹20,900. Step 3: Subtract cheques deposited but not collected = ₹20,900 - ₹3,100 = ₹17,800. Step 4: Subtract bank charges not entered in cash book = ₹17,800 - ₹200 = ₹17,600. Final answer: Balance as per pass book is ₹17,600.
• Q: Balance as per pass book is ₹42,000. Cheques worth ₹7,500 deposited are not credited. Cheques worth ₹4,000 issued are not presented. Interest credited by bank ₹600 is not recorded in cash book. Find balance as per cash book. A: Step 1: Start with pass book balance = ₹42,000. Step 2: Add cheques deposited but not credited because cash book has already increased = ₹42,000 + ₹7,500 = ₹49,500. Step 3: Subtract cheques issued but not presented because cash book has already decreased = ₹49,500 - ₹4,000 = ₹45,500. Step 4: Subtract interest credited by bank because pass book has an extra increase = ₹45,500 - ₹600 = ₹44,900. Final answer: Balance as per cash book is ₹44,900.
• Q: Overdraft as per cash book is ₹15,000. Cheques issued ₹5,000 are not presented. Cheques deposited ₹2,000 are not collected. Bank interest on overdraft ₹700 is not entered in cash book. Find overdraft as per pass book. A: Step 1: Start with overdraft as per cash book = ₹15,000. Step 2: Cheques issued but not presented reduce pass book overdraft, so subtract ₹5,000: ₹15,000 - ₹5,000 = ₹10,000. Step 3: Cheques deposited but not collected increase pass book overdraft compared with cash book, so add ₹2,000: ₹12,000. Step 4: Bank interest charged increases overdraft, so add ₹700: ₹12,700. Final answer: Overdraft as per pass book is ₹12,700.
• Q: The cash book shows bank balance ₹28,000. A customer directly deposited ₹6,000 into bank. A cheque of ₹2,500 deposited was dishonoured. Bank paid insurance premium ₹1,200 as per standing instruction. None of these are recorded in cash book. Find pass book balance. A: Step 1: Start with cash book balance = ₹28,000. Step 2: Direct deposit increases pass book, so add ₹6,000: ₹34,000. Step 3: Dishonoured cheque reduces pass book but cash book still shows receipt, so subtract ₹2,500: ₹31,500. Step 4: Bank payment of insurance reduces pass book, so subtract ₹1,200: ₹30,300. Final answer: Balance as per pass book is ₹30,300.

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