Short Notes — Ch 15 Bank Reconciliation Statement
⚡ Ch 15 — Bank Reconciliation Statement ⭐⭐
PYQ: 6 questions — 2022·Q82, Q93 · 2024·Q39, Q40, Q41, Q49. Appeared in BOTH papers and grew 2 → 4. MCQ bank: 37 questions (Q174–197 · Q350–362). ⭐ Tier A priority. If you learn one chapter properly, make it this one.
1️⃣ The core
BRS = a statement (not an account) prepared by the BUSINESS (not the bank) to explain why the bank balance in the cash book differs from the bank statement.
From the BANK's point of view, your money is THEIR liability.
- You deposit → the bank CREDITS your account
- You withdraw → the bank DEBITS your account
So the two books are mirror images:
| Your Cash Book | Bank Statement / Pass Book |
|---|---|
| DEBIT balance (favourable) | CREDIT balance (favourable) |
| CREDIT balance (overdraft) | DEBIT balance (overdraft) |
Pass Book = ⭐ a copy of the customer's account in the BANK's ledger.
2️⃣ ⭐ The 5 causes of difference (timing differences)
| # | Cause | Effect |
|---|---|---|
| 1 | ⭐ Cheques ISSUED but not yet presented (unpresented / outstanding cheques) | cash book already reduced; bank not yet → pass book HIGHER |
| 2 | ⭐ Cheques DEPOSITED but not yet credited (uncredited / uncleared / deposit in transit) | cash book already increased; bank not yet → pass book LOWER |
| 3 | Direct debits by the bank (bank charges, interest on overdraft, collection charges) | bank reduced; cash book not → pass book LOWER |
| 4 | Direct deposits by customers (debtors paying straight into the bank) | bank increased; cash book not → pass book HIGHER |
| 5 | Direct payments by the bank (standing instructions: insurance, EMI) | bank reduced → pass book LOWER |
Plus errors made by either the business or the bank.
⚠️ Not a timing difference: an item recorded wrongly in both books, or an error — those are error differences, not timing.
3️⃣ ⭐⭐ The golden rule for the sum
Start from one balance → move to the other by asking: "Which book already knows about this?"
Starting from CASH BOOK balance → to reach PASS BOOK:
ADD SUBTRACT Cheques issued but not presented Cheques deposited but not credited Direct deposits by customers Bank charges / interest charged Interest credited by the bank Direct payments made by the bank Dishonoured cheques Starting from PASS BOOK → to reach CASH BOOK: reverse every sign.
The book's format
| Particulars | ₹ |
|---|---|
| Balance as per Cash Book | xxx |
| Add: Cheques issued but not presented | xxx |
| Add: Interest credited by the bank | xxx |
| Less: Cheques deposited but not credited | (xxx) |
| Less: Bank charges not in the cash book | (xxx) |
| = Balance as per Pass Book | xxx |
4️⃣ 🎯 PYQs from this chapter — all six
2024 · Q49 ≡ 2022 · Q93 ⭐ (asked in BOTH papers)
A bank pass book is a copy of — a) cash column of the customer's cash book b) bank column of the customer's cash book c) the customer's account in the bank's ledger d) the debtor's account in the bank's ledger → Ans: C
2024 · Q39 — In a bank statement, cash deposited is shown as ___
a) debit b) credit c) expense d) profit → Ans: B Your deposit is the bank's liability → they credit you.
2024 · Q40 — What is "Deposit in transit" in bank reconciliation?
a) Added to Bank Balance b) Subtracted from Bank Balance c) Subtracted from Cash Book d) Added to Cash Book → Ans: A Recorded by you, not yet by the bank → add it to the bank balance.
2024 · Q41 — Cheques issued by a firm but not yet presented are called
a) Uncredited cheques b) Outstanding cheques c) Uncollected cheques d) Bounced cheques → Ans: B Also called unpresented cheques.
2022 · Q82 — Starting from the Cash Book balance, how are direct deposits by customers adjusted to reach the Pass Book balance?
a) Added b) Subtracted c) Adjusted d) Not adjusted → Ans: A The bank has already credited them; your cash book hasn't → add.
5️⃣ Worked micro-sums (both appear in the MCQ bank)
Q355 — Cash book ₹2,000. Bank charge ₹50 debited by the bank, not yet in the cash book. Pass book balance? Bank has taken ₹50 → 2,000 − 50 = ₹1,950, a credit (favourable) balance in the pass book. → A
Q356 — Pass book ₹1,000. Cheque deposited but not yet credited ₹2,000. Cash book balance? Your cash book already counted it → 1,000 + 2,000 = ₹3,000 favourable. → B
6️⃣ Quick Revision Table
| Point | Answer |
|---|---|
| BRS is prepared by | ⭐ the Business (not the bank, not the auditor) |
| BRS is | a separate statement — not part of the cash book |
| Prepared with the help of | bank statement + bank column of the cash book |
| Pass book = | customer's account in the bank's ledger |
| Favourable balance | debit in cash book = credit in pass book |
| Unfavourable / overdraft | credit in cash book = debit in pass book |
| Cheque not paid by the bank | Dishonoured |
| Uncollected cheques also called | uncleared / uncredited cheques |
| Amount directly deposited by a debtor | cash book shows less, pass book shows more |
| Does NOT affect a BRS | ⭐ discount received (no bank involvement) |
| Recorded in the adjusted cash book | bank charges, direct debits/credits, interest — items the bank knows and you don't |
7️⃣ High-frequency MCQ traps
| MCQ | Point |
|---|---|
| Q174 / Q192 | Purpose = reconcile the bank balance of the cash book with the pass book |
| Q175 | BRS is a separate statement |
| Q177 / Q178 / Q185 / Q191 | ⭐ Favourable/unfavourable in both books — learn the mirror table |
| Q180 / Q350 | Prepared by the business |
| Q182 / Q190 | Bank statement = pass book = copy of the customer's account |
| Q183 | Direct deposits → added when starting from the cash book |
| Q188 | ⭐ Discount received does NOT affect a BRS |
| Q189 | Direct deposit → cash book less, bank more |
| Q193 | Debit balance in cash book = credit in bank statement |
| Q194 | From pass book, interest allowed by bank → subtracted |
| Q352 | Debit balance in the cash book's bank column = credit balance per bank statement |
| Q357 | Spot the item that is not a timing difference |
8️⃣ If you remember nothing else
BRS = a STATEMENT prepared by the BUSINESS · Pass book = customer's a/c in the BANK's ledger · deposit → bank CREDITS you; withdrawal → bank DEBITS you · cash book DEBIT = pass book CREDIT (both favourable) · cheques ISSUED but not presented → ADD · cheques DEPOSITED but not credited → SUBTRACT (when starting from the cash book) · reverse everything if starting from the pass book · discount received does not affect a BRS
Six marks came from this chapter across two papers, and the questions are definition-based, not long sums. Do MCQs Q174–197 and Q350–362 — that is 37 questions covering essentially every angle the exam has used.
🔗 Related
- Full notes: L-15-BANK RECONCILIATION STATEMENT · MCQs Q174–197, Q350–362 in MCQs
- Builds on: SN-9-Cash-Book (overdraft & bank column)
- Prev: SN-14-Balance-Sheet · Next: Ch 16 — Partnership Accounts (pending your go-ahead)
