A bank reconciliation statement (BRS) explains why the bank balance in your cash book and the balance on your bank statement or pass book differ on the same date, and proves that the difference is fully accounted for. This page gives the format, the rule for every item, and worked problems for both a favourable balance and an overdraft. FLN Tutors (Freelancer Network) also offers one-to-one help with BRS. Matched to a verified specialist who knows your course, your university's marking criteria, and your deadline.
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Your business keeps its own record of the bank account, in the bank column of the cash book. The bank keeps its record, which you see as the bank statement (the "pass book" in Indian textbooks). On any given date the two balances almost always differ, and a bank reconciliation statement lists every reason why, until the difference is zero.
One point causes more confusion than anything else on this topic: the two records are kept from opposite sides. Money you have in the bank is an asset to you, so a favourable balance is a debit in your cash book. To the bank, the same money is a debt it owes you, so it appears as a credit in the pass book. An overdraft is the reverse: a credit balance in the cash book and a debit balance in the pass book.
Every difference falls into one of three groups:
Keep those three groups in mind and every question on this topic becomes a sorting exercise.
| Item | Recorded in cash book? | Recorded in pass book? | Group |
|---|---|---|---|
| Cheques issued but not yet presented for payment | Yes, already deducted | Not yet | Timing |
| Cheques deposited but not yet credited (deposits in transit) | Yes, already added | Not yet | Timing |
| Bank charges and commission | Not yet | Yes, deducted | Bank first |
| Interest charged on an overdraft | Not yet | Yes, deducted | Bank first |
| Interest allowed by the bank | Not yet | Yes, added | Bank first |
| Customer paying directly into the account (direct deposit, credit transfer) | Not yet | Yes, added | Bank first |
| Dividends or bills collected by the bank on your behalf | Not yet | Yes, added | Bank first |
| Standing orders and direct debits paid by the bank | Not yet | Yes, deducted | Bank first |
| Cheque deposited and then dishonoured | Added when deposited, reversal not yet recorded | Yes, reversed | Bank first |
| Error in the cash book, or an error by the bank | Depends on the error | Depends on the error | Error |
The question to ask for every item is simple: which record has it, and which does not? Once you know that, the direction of the adjustment follows from the next section, and you never need to memorise a long list of "add" and "less" items.
The statement starts from one balance, adjusts it item by item, and must arrive exactly at the other balance. This is the layout most syllabuses expect when you start from a favourable cash book balance:
Bank Reconciliation Statement as on 31 March
| Particulars | ₹ | ₹ |
|---|---|---|
| Balance as per cash book (Dr) | xxx | |
| Add: Cheques issued but not yet presented | xxx | |
| Interest allowed by the bank, not in cash book | xxx | |
| Direct deposits by customers, not in cash book | xxx | xxx |
| xxx | ||
| Less: Cheques deposited but not yet credited | xxx | |
| Bank charges, not in cash book | xxx | |
| Payments made by the bank under standing instructions | xxx | |
| Cheques deposited and dishonoured, not in cash book | xxx | xxx |
| Balance as per pass book (Cr) | xxx |
The heading always carries the date, because a reconciliation is only true for one day. Many marks are lost for a missing date or a missing "(Dr)" or "(Cr)" on the opening and closing balances.
The rule behind every "add" and "less": ask what the item did to the balance you are starting from that it has not yet done to the other one. A cheque you issued has already reduced your cash book but not the bank's figure, so the bank's balance is higher, and you add it back. A bank charge has reduced the bank's figure but not yours, so the bank's balance is lower, and you deduct it.
The problem. On 31 March the bank column of a trader's cash book shows a debit balance of ₹48,500. Comparing it with the pass book reveals:
Prepare the bank reconciliation statement.
| Particulars | ₹ | ₹ |
|---|---|---|
| Balance as per cash book (Dr) | 48,500 | |
| Add: (a) Cheques issued, not presented | 12,000 | |
| (d) Interest allowed by bank | 1,100 | |
| (e) Direct deposit by customer | 6,000 | 19,100 |
| 67,600 | ||
| Less: (b) Cheques deposited, not credited | 9,200 | |
| (c) Bank charges | 350 | |
| (f) Insurance paid by bank | 2,400 | |
| (g) Cheque dishonoured | 3,000 | 14,950 |
| Balance as per pass book (Cr) | 52,650 |
Check it the other way. Start from the pass book balance of ₹52,650 and reverse every adjustment: 52,650 − 19,100 + 14,950 = ₹48,500, the cash book balance. If a reconciliation does not work in both directions, one of the signs is wrong.
Why (g) is deducted: when the cheque was deposited, the cash book recorded a receipt. The bank has since reversed it, so the bank's balance is lower than the cash book's until the dishonour is recorded.
IGCSE, O Level and most UK and Malaysian syllabuses expect a two-stage method, and many university courses prefer it too: first correct the cash book for everything the bank knew about first, then reconcile only the timing differences.
Stage 1: update the cash book using the same data as the worked example above.
| Updated cash book (bank column) | ₹ |
|---|---|
| Balance b/d (Dr) | 48,500 |
| Add: interest allowed | 1,100 |
| Add: direct deposit by customer | 6,000 |
| Less: bank charges | (350) |
| Less: insurance paid by standing order | (2,400) |
| Less: dishonoured cheque | (3,000) |
| Updated balance c/d (Dr) | 49,850 |
Stage 2: reconcile the timing differences only.
| Particulars | ₹ |
|---|---|
| Balance as per updated cash book (Dr) | 49,850 |
| Add: cheques issued, not presented | 12,000 |
| Less: cheques deposited, not credited | (9,200) |
| Balance as per bank statement (Cr) | 52,650 |
Same answer, ₹52,650, reached a different way. The advantage is that the updated figure of ₹49,850 is the one that goes into the balance sheet, because it is the true bank balance once the timing differences have cleared. The single-statement method never produces that figure, which is why examiners ask for "the correct cash book balance" so often.
Overdraft questions are where most marks are lost, because every rule from the favourable case reverses.
The problem. On 30 June the pass book shows an overdraft of ₹25,000. You find:
Find the balance as per the cash book.
The safe method: treat an overdraft as a negative number. Then the favourable-balance logic still works without reversing anything by memory.
Cash book balance = −25,000 − 8,000 + 15,000 + 900 + 4,500 = −12,600, an overdraft of ₹12,600 as per the cash book.
Set out in the overdraft format:
| Particulars | ₹ | ₹ |
|---|---|---|
| Overdraft as per pass book (Dr) | 25,000 | |
| Add: Cheques issued, not presented | 8,000 | |
| 33,000 | ||
| Less: Cheques deposited, not collected | 15,000 | |
| Interest on overdraft, not in cash book | 900 | |
| Receipt overstated in cash book | 4,500 | 20,400 |
| Overdraft as per cash book (Cr) | 12,600 |
Notice why the unpresented cheques are added here: starting from the bank's overdraft, they make the cash book more overdrawn than the bank's figure. In the favourable example they were added for a different reason, because they left the bank's balance higher than the cash book's. Work with signed numbers and you never have to reason that out under exam pressure.
Questions sometimes give only "the balance as per cash book" and a list of items, and ask for the pass book balance. Others give both balances and ask you to find a missing item. In that case, reconcile everything you know; the figure needed to close the gap is the missing item.
CBSE Class 11 Accountancy teaches BRS as its own chapter. Questions usually start from either the cash book or the pass book, in favourable or overdraft form, and may ask you to adjust the cash book first. Expect to state the reasons for disagreement as a theory question as well.
Cambridge IGCSE Accounting (0452) and O Level use the updated cash book followed by the statement, and the question often asks for the updated cash book in full, with dates, before the reconciliation. The terms there are "bank statement", "unpresented cheques" and "deposits not yet credited", rather than "pass book".
University and professional courses add errors by the bank, cheques recorded on the wrong side, and questions where you must find the opening cash book balance from the closing reconciliation. The method is the same; only the number of items grows.
Bank reconciliation in Tally Prime follows the same logic. You enter the date each entry cleared the bank, and the software reports the entries still unreconciled, which are exactly your timing differences. Understanding the manual statement first makes that report readable.
See accounts help for the cash book, trial balance and final accounts, journal entries and ledger posting for the records a reconciliation is built from, finalisation of accounts for where the corrected bank balance ends up, and Tally ERP 9 help for doing this in software.
If a reconciliation will not balance, send it over with your own working and a tutor will show you which item is going the wrong way.
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A bank reconciliation statement is a schedule prepared on a particular date that explains the difference between the bank balance in the cash book and the balance on the bank statement or pass book. It lists every timing difference, bank-only item and error until both balances agree exactly.
It is prepared to confirm that both records are correct, to find items the business has not yet recorded such as bank charges or direct deposits, to detect errors or fraud early, and to establish the true bank balance that should be shown in the balance sheet at the period end.
Differences come from timing, such as cheques issued but not presented or deposits not yet credited; from items the bank records first, such as charges, interest, direct deposits, standing orders and dishonoured cheques; and from errors made either in the cash book or by the bank itself.
The statement has a dated heading, an opening balance labelled Dr or Cr, a section of additions, a section of deductions, and a closing balance that must equal the other record. Additions and deductions are totalled separately in two money columns, which makes the arithmetic easy for an examiner to follow.
Because each record is kept from its owner's point of view. Money in the bank is an asset to the business, so it is a debit in the cash book. To the bank the same money is owed to the customer, so it appears as a credit balance in the pass book.
Cheques issued but not yet presented have already reduced the cash book balance but not the bank balance. Starting from a favourable cash book balance you therefore add them back. Starting from a favourable pass book balance you deduct them. With an overdraft, work with signed numbers to keep the direction correct.
These deposits have already increased the cash book balance but the bank has not collected them yet. Starting from a favourable cash book balance, deduct them to reach the pass book balance. Starting from the pass book, add them. They clear automatically once the bank credits the account.
Treat the overdraft as a negative balance and apply the same reasoning as for a favourable balance: ask what each item has done to the starting record that it has not yet done to the other. The result is a negative figure, meaning an overdraft, on the other side.
The cash book is first corrected for items the bank recorded first, such as charges, interest, direct deposits, standing orders and dishonoured cheques. The corrected balance is then reconciled with the bank statement using only timing differences. The corrected cash book figure is the one shown in the balance sheet.
The updated cash book balance goes into the balance sheet, after correcting for every item the bank recorded first and for any errors in the cash book. Neither the original cash book balance nor the bank statement balance is used, because both still contain differences that have not cleared.
When the cheque was deposited the cash book recorded a receipt, but the bank has since reversed it. If the cash book has not recorded the dishonour, deduct the amount from a favourable cash book balance in the statement, or correct the cash book first under the adjusted method, never both.
Correct only the difference the error caused. A receipt of ₹2,700 recorded as ₹7,200 overstated the cash book by ₹4,500, so that is the adjustment, not either full amount. Work out first whether the error made the cash book balance higher or lower than it should be.
Reconcile back the other way. Start from the balance you arrived at, reverse every addition and deduction, and you should land exactly on the balance you started from. If you do not, at least one item is going in the wrong direction, usually an overdraft item or an unpresented cheque.
Yes. Bank reconciliation statement is a chapter of the CBSE Class 11 Accountancy course, with practical questions starting from either the cash book or the pass book, in favourable and overdraft form, and theory questions on the reasons for disagreement between the two balances on the same date.
Yes. A one-to-one tutor can work through reconciliations with you, from sorting the items to the overdraft case and the adjusted cash book method, and check where your own working goes wrong. You complete your own assessed work in line with your school or university's academic rules.
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