Bank Reconciliation Statement Class 11 Notes

The cash book is written by the business from its own records. The pass book, or bank statement, is written by the bank from its own records of receipts, payments and charges. Each side knows things the other does not, and each learns some items later than the other, so neither balance can be accepted without checking.

• Timing difference: an instrument such as a cheque has been recorded by one party before it is presented to and processed by the other.
• Error difference: an arithmetical or posting error has been made in one of the two records only.
• The BRS is prepared by the business, usually by the person who maintains the cash book, and it is checked by the bank for the pass book figure.
• The reconciliation identifies errors so that the wrong party can correct them; it does not make the correction itself.

The balance as per the cash book of a trader on 31 March 2026 is Rs. 48,000. Cheques issued but not yet presented amount to Rs. 7,000, and cheques deposited but not yet collected amount to Rs. 5,000. The bank has charged Rs. 300 for bank charges and has credited Rs. 450 as interest, and a customer has deposited Rs. 1,200 directly into the bank. The bank has also paid Rs. 500 directly for an insurance premium.

• Start: balance as per the cash book, Rs. 48,000.
• Deduct cheques issued but not presented, Rs. 7,000.
• Deduct bank charges, Rs. 300, and interest credited by the bank, Rs. 450.
• Deduct direct payment made by the bank for insurance premium, Rs. 500.
• Add cheques deposited but not collected, Rs. 5,000.
• Add direct deposit by the customer, Rs. 1,200.

Here the pass book of a trader shows an overdraft of Rs. 22,000 on 31 March 2026. Cheques issued but not yet presented amount to Rs. 4,000, cheques deposited but not collected amount to Rs. 6,500, the bank has credited interest of Rs. 200 to the account, and it has debited the account with bank charges of Rs. 150 and with a direct payment of Rs. 300 for a telephone bill.

• Start: balance as per the pass book, overdraft Rs. 22,000, shown as a positive figure.
• Add cheques deposited but not collected, Rs. 6,500.
• Add cheques issued but not presented, Rs. 4,000.
• Deduct bank charges, Rs. 150, direct payment of telephone bill, Rs. 300, and interest credited, Rs. 200.
• Arrive at the balance as per the cash book and state clearly whether it is a debit or a credit balance.

A reconciliation always starts from the balance as per the cash book, treating it as a positive figure, and works through the items in a fixed order until the balance as per the pass book is reached. Two conventions must be held exactly, and each carries marks.

• Cheques issued but not yet presented for payment: deducted, because the business has already reduced the cash book but the bank has not yet paid.
• Cheques deposited but not yet collected or credited: added, because the bank has not yet increased its balance but the business has.
• Direct deposit or direct payment made by a customer into the bank: added, since the business has not yet recorded the receipt.
• Direct payment by the bank for expenses such as bank charges, interest or insurance: deducted, since the business has not yet recorded it.
• Bank charges and commission, interest credited by the bank, and dividends or interest collected by the bank: deducted.
• An overdraft as per the pass book: treated as a positive figure starting from that balance, and the same rules apply to it.

Treat the following as the fixed sequence for any BRS question, whether the starting balance is favourable or an overdraft. Set out the balance as per the cash book, then a statement of reconciling items, then the balance as per the pass book.

• Write the balance as per the cash book on the credit side, described as the starting point.
• List the reconciling items in the two-column format, each with a one-line reason.
• Deduct cheques issued but not presented, and bank charges, commission, interest and direct payments by the bank.
• Add cheques deposited but not collected, and direct deposits and direct payments received into the bank.
• Arrive at the balance as per the pass book, and if it is an overdraft, state it as a deduction.
• Add a note explaining any error found in the cash book, but do not record a journal entry for it.
• Where the question supplies both a cash book and a pass book, prepare two statements, one starting from each figure, and the two answers must reconcile to the same pass book balance.

Not every reconciling item is a timing difference. Sometimes one of the two records is simply wrong, and the BRS then becomes the means of locating the error. Classify the error, state which record is wrong, and then give the correcting entry if the business is the party at fault.

• Error in the cash book, such as a cheque issued recorded at the wrong amount: the correcting entry is made in the cash book.
• Error in the pass book, such as a cheque deposited by the customer wrongly credited to another account: the bank must correct it, and the business makes no entry.
• A direct deposit credited by the bank for a receipt the business has already recorded creates a timing difference, not an error.
• The BRS is a reconciliation document, so the correcting entry for a cash book error is shown in the answer as a note, never as part of the statement itself.