Bank Reconciliation Statement – CA Foundation Accounts Study Material is designed strictly as per the latest syllabus and exam pattern.
Bank Reconciliation Statement – CA Foundation Accounts Study Material
Meaning of Bank Reconciliation Statement
Meaning of Bank Reconciliation Statement:
A bank a/ c or bank book is maintained by us to record the transactions with bank. Similarly Bank maintains our a/c in their books. A copy of which is given to us known as Bank statement or passbook. All the transactions recorded by us will be recorded by bank also, therefore normally the balance shown by the two books must be same and should be opposite balance. But practically this balances at a particular time (i.e. on a particular date) doesn’t tally because there is always some time gap between recording of the same transaction by us and by bank.
To find out the causes of difference, we prepare a Bank Reconciliation Statement (BRS). The items which comes in Reconciliation statement, can be grouped in following 4 categories.
→ Items recorded by bank but not recorded in our books.
Example : a. Bank charges charged by Bank b. Interest credited by Bank
→ Recorded by us but not recorded by bank. (Bank will record at a latter date).
Example : a. Cheque deposited but not yet realised b. Cheque issued but not yet paid by Bank
→ Errors committed in our books (i.e. in cash book – bank column).
Example : a. Totalling, balancing error b. Cheque deposited & returned dishonoured but not yet reversed.
→ Errors committed by bank (i.e. in pass book).
Example : a. Totalling, balancing error b. An item of some other person debited or credited to our a/c.
From the following particulars prepare a Bank Reconciliation Statement as on 31st December, 2005:
1. On 31st December, 2005 the Cash-book of a firm showed deposit with bank Dr. balance of ₹ 6,000.
2. Cheques had been issued for ₹ 5,000, out of which cheques worth ₹ 4,000 only were presented for payment.
3. Cheques worth ₹ 1,400 were deposited in the bank on 28th December, 2005 but had not been credited by the bank. In addition to this, one cheque for ₹ 500 was entered in the Cash-book on 30th December, 2005 but was banked on 3-1-2006.
4. A cheque from Susan for ₹ 400 was deposited in the bank on 26th December, 2005 but was dishonoured and the advice was received on 2-1-2006.
5. Pass-book showed bank charges of ₹ 20 debited by the bank.
6. One of the debtors deposited a sum of ₹ 500 in the bank account of the firm on 20th December, 2005 but the intimation in this respect was received from the bank on 2-1-2006.
7. Bank Pass-book showed a credit balance of ₹ 5,180 on 31st December, 2005.
BRS in Add less form
The cash book of a firm showed an overdraft (Cr) of ₹ 30,000 on 31 st March, 2006. A comparison of the entries in the cash book and pass book revealed that –
(i) On 22nd March, 2006, cheques totalling ₹ 6,000 were sent to bankers for collection. Out of these, a cheque for ₹ 1,000 was wrongly recorded on the credit side of the cash book and cheques amounting to ₹ 300 could not be collected by bank before 1st April, 2006.
(ii) A cheque for ₹ 4,000 was issued to a supplier on 28th March, 2006. The cheque was presented to bank on 4th April, 2006.
(iii) There were debits of ₹ 2,600 in the pass book for interest on overdraft and bank charges, but the same had not been recorded in the cash book.
(iv) A cheque for ₹ 1,000 was issued to a creditor on 27th March, 2006 but by mistake the same was not recorded in the cash book. The cheque was, however, duly encashed by 31st March, 2006.
(v) As per standing instructions, the banker collected dividend of ₹ 500 on behalf of the firm and credited the same to its account by 31st March, 2006. The fact was, however, intimated to the firm on 3rd April, 2006.
You are required to prepare a bank reconciliation statement as on 31st March, 2006.
Bank Reconciliation Statement as on 31.3.06
|Balance as per Cash Book (Overdraft)||2,000||30,000|
|Cheques deposited but not realised||4,000||300|
|Cheques deposited wrongly credited in Cash book|
|Cheques issued but not yet paid|
|Bank charges & interest charged by Bank||2,600|
|Cheques issued but not recorded||1,000|
|Dividend directly collected by Bank||500|
|Balance as per Pass book (Overdraft)||27,400|
Alternatively Bank Reconciliation Statement can be made in Add-Less form
While converting BRS in add-less form see that starting balance is credit hence add all credit items & deduct all debit items.
From the following information (as on 31.3.2006), prepare a Bank Reconciliation Statement after making necessary amendments in the Cash-book:
|Bank balance as per Cash Book (Dr.)||3,25,000|
|Cheques deposited, but not yet credited||4,47,500|
|Cheques issued but, not yet presented for payment||3,56,200|
|Bank charges debited by Bank but not recorded in Cash-book||1,250|
|Dividend directly collected by bank||12,500|
|Insurance premium paid by bank as per standing instruction not intimated||15,900|
|Cash sales wrongly recorded in the bank column of the Cash-book||25,500|
|Customer’s cheque dishonoured by bank not recorded in Cash-book||13,000|
|Wrong Credit given by bank||15,000|
Also show the bank balance that will appear in the Trial Balance as on 31.3.2006.
Cash Book as on 31.3.2006 (Bank Column)
(after making necessary amendments)
Bank Reconciliation Statement as on 31.3.2006
Note: The bank balance of ₹ 2,81,850 will appear in the trial balance as on 31st March, 2006 & consequently in Balance sheet.
Final BRS as on 31.3.2006
Perfect Pvt. Ltd., has two accounts with Ever Bank Ltd. The account were known as ‘Account-I’ and ‘Account-II. As at December, 31, 2005 the balance as per A/c books reflected the following:
Account-I ₹ 1,25,000 Regular balance. Account-II ₹ 1,11,250 Overdraft balance.
The accountant failed to tally the balance with the Pass Book and the following information was available:
1. The Bank has charged Interest on Account-II, ₹ 11,375 and credited Interest on Account-I, ₹ 1,250. These were not recorded by the accountant.
2. ₹ 12,500 drawn on Dec. 10, 2005, from Account-I was recorded in the books of Account-II.
3. Bank charges of ₹ 150 and ₹ 1,125 for Account-I and Account-II were not recorded in the books.
4. A deposit of ₹ 17,500 in Account-I was wrongly entered in Account-H in the books.
5. Two cheques of ₹ 12,500 and ₹ 13,750 deposited in Account-I, but entered in Account-II in books, were dishonoured. The entries for dishonoured cheques were entered correctly in Account-II.
6. Cheques issued for ₹ 1,50,000 and ₹ 15,000 from Accounts-I and II respectively, were not presented till 5th January, 2006.
7. Cheques deposited ₹ 1,25,000 and ₹ 1,17,500 in Accounts-I and II respectively, were credited by bank only on February, 2, 2006.
You are required to prepare the Bank Reconciliation Statement for Accounts-I and II.
Bank reconciliation statement: Account – I
Bank reconciliation statement: Account – II
In both the BRS no effect has come for item (e) because entry for deposit as well as its dishonour both has come in A/c-II. That means it has nil effect every where.
Entry in our books for items (b) & (d) will be as follows, at the time of finalization:
|Entry for (b)||Entry for (d)|
|Bank a/c II a/c Dr. 12500||Bank a/c I a/c Dr. 17500|
|To Bank a/c I a/c 12500||To Bank a/c II a/c|
Based on the following extracts from the Cash Book and the Pass Book for the month of January, 2006, prepare the Bank Reconciliation Statements as on 31st Jan., 2006.
Cash Book (Bank Columns Only)
Bank Reconciliation Statement as on 31st January, 2006
The Bank Pass Book of Account No. 5678 of Mrs. Rani showed an over draft of ₹ 33,575 on 31st March 2018. On going through the Pass Book, the accountant found the following:
(i) A Cheque of ₹ 1,080 credited in the pass book on 28th March 2018 being dishonoured is debited again in the pass book on 1st April 2018. There was no entry in the cash book about the dishonour of the cheque until 15th April 2018.
(ii) Bankers had credited her account with ₹ 2,800 for interest collected by them on her behalf, but the same has not been entered in her cash book.
(iii) Out of ₹ 20,500 paid in by Mrs. Rani in cash and by cheques on 31st March 2018 cheques amounting to ₹ 7,500 were collected on 7th April, 2018.
(iv) Out of Cheques amounting to ₹ 7,800 drawn by her on 27th March, 2018 a cheque for ₹ 2,500 was encashed on 3rd April, 2018.
(v) Bankers seems to have given here wrong credit for ₹ 500 paid in by her in Account No. 8765 and a wrong debit in respect of a cheque for ₹ 300 against her account No. 8765.
(vi) A cheque for ₹ 1,000 entered in Cash Book but omitted to be banked on 31st March, 2018.
(vii) A Bill Receivable for ₹ 5,200 previously discounted (Discount ₹ 200) with the Bank had been dishonoured but advice was received on 1st April, 2018.
(viii) A Bill for ₹ 10,000 was retired/paid by the bank under a rebate of ₹ 175 but the full amount of the bill was credited in the bank column of the Cash Book.
(ix) A Cheque for ₹ 2,400 deposited into bank but omitted to be recorded in Cash Book and was collected by the bank on 31st March, 2018.
Prepare Bank Reconciliation Statement as on 31st March, 2018.
Bank Reconciliation Statement as on 31st March, 2018
|Bank balance (Debit i.e. overdraft) as per Bank Pass book||33,575|
|(i) No adjustment required as there would be no difference on 31.3.18||2,800|
|(ii) Add: No entry in Cash book for interest collection by Bank||(7,500)|
|(iii) Less: Amount debited in cash book for pending cheques in collection but not credited in Pass Book||2,500|
|(iv) Add: Cheque credited in cash book but not debited in pass book||500|
|(v) Add: Reversal of wrong Credit
Less: Reversal of wrong debit
|(vi) Less: Cheque of ₹ 1,000 entered in cash book but omitted to be banked||(1,000)|
|(vii) Less: Discounted bill dishonoured but no entry in Cash book||(5,200)|
|(viii) Add: Rebate on bill retired not entered in cash book||175|
|(ix) Add: Cheques deposited in bank not yet recorded in cash book||2,400|
|Balance (Cr. i.e. overdraft) as per Cash book||27,950|
Note: A cheque of ₹ 1,080 credited in Pass Book on 28th March, 2018 and later debited in Pass Book on 1st April, 2018 has no effect on Bank Reconciliation statement as at 31st March, 2018.
Prepare a bank reconciliation statement from the following particulars as on 31 st March 2018:
|Debit balance as per bank column of the cash book||18,60,000|
|Cheque issued to creditors but not yet presented to the Bank for payment||3,60,000|
|Dividend received by the bank but not entered in the Cash book||2,50,000|
|Interest allowed by the Bank||6,250|
|Cheques deposited into bank for collection but not collected by bank up to this date||7,70,000|
|Bank charges not entered in Cash Book||1,000|
|A cheque deposited into bank was dishonoured, but no intimation received||1,60,000|
|Bank paid house tax on our behalf, but no intimation received from bank in this connection|
Bank Reconciliation Statement
(as on March 31, 2018)
Prepare the Bank Reconciliation Statement of M/s. R.K. Brothers on 30th June 2018 from the particulars given below :
(i) The Bank Pass Book had a debit balance of ₹ 25,000 on 30th June, 2018.
(ii) A cheque worth ₹ 400 directly deposited into Bank by a customer but no entry was made in the Cash Book.
(iii) Out of cheques issued worth ₹ 34,000, cheques amounting to Rs. 20,000 only were presented for payment till 30th June, 2018.
(iv) A cheque for ₹ 4,000 received and entered in the Cash Book but it was not sent to the Bank.
(v) Cheques worth ₹ 20,000 had been sent to Bank for collection but the collection was reported by the Bank as under :
- Cheques collected before 30th June, 2018, ₹ 14,000
- Cheques collected on 10th July, 2018, ₹ 4,000
- Cheques collected on 12th July, 2018, ₹ 2,000.
(vi) The Bank made a direct payment of ₹ 600 which was not recorded in the Cash Book.
(vii) Interest on Overdraft charged by the bank ₹ 1,600 was not recorded in the Cash Book.
(viii) Bank charges worth Rs. 80 have been entered twice in the cash book whereas Insurance charges for ₹ 70 directly paid by Bank was not at all entered in the Cash Book.
(ix) The credit side of bank column of Cash Book was under cast by ₹ 2,000.
Bank Reconciliation Statement of M/s R.K. Brothers as on 30th June 2018
True of False
The interest charged by Banker to customer on overdrawn account is called Red ink interest.
False: Interest charged by banker to customer on overdrawn account is called ‘interest on overdraft’.
Bank reconciliation statement is prepared to arrive at the bank balance.
False: Bank reconciliation statement is prepared to reconcile the differences between bank balance as per cash book and balance in bank statement.
Interest charged by the bank will be deducted, when the overdraft as per the cash book is the starting point for making the bank reconciliation statement.
False: Interest charged by the bank will be added because it will increase the overdraft as shown by the cash book.
If the balance as per cash book and pass book are the same, there is no need to prepare a reconciliation statement.
False: Bank reconciliation statement is prepared to find out the reasons of difference in cash book and pass book even if the balance as per cash book and pass book are same.