📑 Topics on this page (Jump to Topic):
📌 1. BRS: Meaning & Need
- Pass book / bank statement = copy of the customer's account in the bank's books. Bank column of the cash book = the bank account in the firm's books.
- A deposit is a debit in the cash book but a credit in the pass book — they mirror each other.
- A BRS is a statement (not an account) that explains and reconciles the difference between the two balances; usually prepared at month-end. It helps detect errors and fraud.
📌 2. Causes of Difference
| Cause | Recorded first in | Effect (starting from cash book balance) |
|---|---|---|
| Cheques issued but not yet presented | Cash book | Add (+) |
| Cheques deposited but not yet cleared | Cash book | Less (−) |
| Bank charges, interest debited by bank | Pass book | Less (−) |
| Interest credited, direct deposit by customer | Pass book | Add (+) |
| Standing-instruction payments by bank (insurance premium) | Pass book | Less (−) |
| Deposited cheque dishonoured | Pass book | Less (−) |
| Dividend/bill collected by bank | Pass book | Add (+) |
- If you start from the pass book balance, every sign is reversed.
- In an overdraft, the cash book shows a credit balance and the pass book a debit balance; starting from an overdraft also reverses the add/less signs.
📌 3. Solved Example
On 31 March the cash book bank balance is ₹45,000 (Dr.). Cheques issued ₹8,000 not presented; cheques deposited ₹5,500 not cleared; bank charges ₹300; bank credited interest ₹1,200.
| Particulars | + (₹) | − (₹) |
|---|---|---|
| Balance as per cash book | 45,000 | |
| Add: cheques not presented | 8,000 | |
| Add: interest credited by bank | 1,200 | |
| Less: cheques not cleared | 5,500 | |
| Less: bank charges | 300 | |
| Balance as per pass book | 48,400 |
Working: 45,000 + 8,000 + 1,200 − 5,500 − 300 = ₹48,400.
⚠️ Exam Traps:
- After the BRS, items first recorded in the pass book (charges, interest, direct deposits) must still be entered in the cash book — the "amended cash book".
- Unpresented and uncleared cheques are already in the cash book; no correction entry is needed for them.
💡 Memory Tip: Starting from the cash book: "add what the bank gave (credited), subtract what the bank took (debited)".
📌 4. Worked Examples
Full example: Bank Reconciliation Statement (BRS)
On 31 March the cash book bank balance (Dr.) is ₹25,000. Data: (1) cheques issued but not presented ₹6,000; (2) cheques deposited but not cleared ₹4,500; (3) bank charges ₹300; (4) interest credited by bank ₹800; (5) direct deposit by a customer ₹2,000; (6) cheque dishonoured ₹1,200 (not in cash book); (7) insurance premium paid by ECS ₹1,500. Items (3)–(7) appear only in the pass book.
| Particulars | ₹ | ₹ |
|---|---|---|
| Balance as per cash book (Dr.) | 25,000 | |
| Add: cheques issued but not presented | 6,000 | |
| Add: interest credited by bank | 800 | |
| Add: direct deposit by customer | 2,000 | 8,800 |
| 33,800 | ||
| Less: cheques deposited but not cleared | 4,500 | |
| Less: bank charges | 300 | |
| Less: cheque dishonoured | 1,200 | |
| Less: insurance premium by ECS | 1,500 | 7,500 |
| Balance as per pass book (Cr.) | 26,300 |
Amended cash book method: 25,000 + 800 + 2,000 − 300 − 1,200 − 1,500 = ₹24,800. Then BRS: 24,800 + 6,000 − 4,500 = ₹26,300 — the same answer. Only the timing items (1) and (2) remain in the BRS.
📌 5. Practice MCQs
📝 Practice MCQs (prepared by SF Prep — not PYQs)
Q1. A bank reconciliation statement is prepared by: Practice
Correct answer: (D)
The business reconciles its cash book with the pass book.
The business reconciles its cash book with the pass book.
Q2. A BRS is a: Practice
Correct answer: (B)
It is not part of the ledger.
It is not part of the ledger.
Q3. A debit balance in the cash book corresponds to which balance in the pass book? Practice
Correct answer: (B)
To the bank, the depositor is a creditor, so credit.
To the bank, the depositor is a creditor, so credit.
Q4. Starting from the cash book balance, cheques issued but not presented are: Practice
Correct answer: (C)
Already reduced in the cash book but not in the pass book.
Already reduced in the cash book but not in the pass book.
Q5. Starting from the cash book balance, bank charges are: Practice
Correct answer: (D)
Already reduced in the pass book, not in the cash book.
Already reduced in the pass book, not in the cash book.
Q6. An amount deposited directly into the bank by a customer is first recorded in the: Practice
Correct answer: (A)
The business learns of it later.
The business learns of it later.
Q7. Cash book balance ₹45,000; unpresented cheques ₹8,000; uncleared cheques ₹5,500. Pass book balance: Practice
Correct answer: (D)
45,000 + 8,000 − 5,500 = 47,500.
45,000 + 8,000 − 5,500 = 47,500.
Q8. In an overdraft, the cash book shows a: Practice
Correct answer: (A)
The business owes the bank.
The business owes the bank.
Q9. Starting from the pass book balance, interest credited by the bank is: Practice
Correct answer: (B)
It is already added in the pass book but not in the cash book.
It is already added in the pass book but not in the cash book.
Q10. A deposited cheque dishonoured — starting from the cash book balance, it is: Practice
Correct answer: (C)
The bank has debited the amount back.
The bank has debited the amount back.
Q11. A main benefit of preparing a BRS is: Practice
Correct answer: (C)
Matching two records reveals discrepancies.
Matching two records reveals discrepancies.
Q12. Insurance premium paid by the bank under standing instructions (starting from the cash book): Practice
Correct answer: (D)
The pass book balance has already fallen.
The pass book balance has already fallen.
Q13. Cheques issued are not yet presented because: Practice
Correct answer: (A)
A timing difference.
A timing difference.
Q14. Bank charges ₹2,000 appear in the pass book but not in the cash book. After BRS, the correcting entry is: Practice
Correct answer: (B)
The cash book must be updated.
The cash book must be updated.
Q15. The pass book shows an overdraft (Dr.) of ₹10,000. A cheque of ₹3,000 deposited is not cleared. The cash book overdraft (no other difference) is: Practice
Correct answer: (A)
The deposit is already in the cash book, so the overdraft is lower: 10,000 − 3,000.
The deposit is already in the cash book, so the overdraft is lower: 10,000 − 3,000.
Q16. A BRS is usually prepared: Practice
Correct answer: (C)
Regular reconciliation catches errors early.
Regular reconciliation catches errors early.
Q17. Dividend collected by the bank is in the pass book. Starting from the cash book, it is: Practice
Correct answer: (D)
The bank has credited it.
The bank has credited it.
Q18. A debit balance in the pass book means: Practice
Correct answer: (B)
A pass book debit balance means the business owes the bank.
A pass book debit balance means the business owes the bank.
Q19. A cheque payment of ₹540 was recorded as ₹450 in the cash book. Starting from the cash book, we: Practice
Correct answer: (B)
The payment was understated by ₹90, so the cash book balance is ₹90 too high.
The payment was understated by ₹90, so the cash book balance is ₹90 too high.
Q20. A pass book is a copy of the: Practice
Correct answer: (C)
The bank issues it to the customer.
The bank issues it to the customer.