MODULE - II

Journal and Other

Subsidiary Books
8

Notes
BANK RECONCILIATION
STATEMENT

If you are a businessman, you must be having a bank account. Whatever banking
transactions you do, you record them in bank column of the cash book, while
the bank is having account in your name in its ledger, copy of your account in
the form of pass book or bank statement is sent to you. If you record all the
transactions correctly in your cash book and bank in its ledger both will show
same balance on any date. But if you find a difference then what will you do?
You will compare the two and find out the reasons of difference. You can
prepare a statement putting up all items of difference in such a way that you
can ascertain the correct balance. This statement is called Bank Reconciliation
Statement.
In this lesson you will learn the meaning of Bank Reconciliation Statement, objectives
of preparing it, main reasons of difference between cash book balance and pass
book balance and preperation of the statement.

OBJECTIVES
After studying this lesson, you will be able to
• state the meaning and need of preparing Bank Reconciliation Statement;
• explain the reasons for difference between the balances of Cash Book and
Pass Book and
• understand the preperation of Bank Reconciliation Statement.
8.1 BANK RECONCILIATION STATEMENT - MEANING
AND NEED
Bank Reconciliation Statement is a statement prepared, periodically with a view to
enlist the reasons for difference between the balances as per the bank column of the
cashbook and pass book/bank statement on any given date.
Need of preparing Bank Reconciliation Statement
A Bank Reconciliation Statement is a statement reconciling the balance as
shown by the bank passbook and the balance as shown by the Bank column of the
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Cashbook. The objective of preparing such a statement is to know the causes of Subsidiary Books
difference between the two balances and to reconcile these differences.
8.2 CAUSES OF DIFFERENCES BETWEEN CASH BOOK
AND PASS BOOK
The reasons for difference in balance of the cash book and pass book are as under: Notes
i) Cheques issued by the Trader but not yet presented for payment :
When cheques are issued by Trader in favour of his creditors, these
are shown on the payment side of the bank column of the cash book. It
reduces the bank balance as per cash book. The bank will debit the
firm’s account when these cheques are presented for payment. There is
a time period between the issue of cheque and its being presented in
the bank for payment. This may cause difference to the balance of cash
book and pass book.
ii) Cheques deposited into bank but not yet collected or credited by the
Bank : When cheques are deposited into bank, the firm immediately enters
it on the debit side of the bank column of cash book. It increases the bank
balance as per the cash book. However, it takes time in, collecting the amount
of cheques, so Bank Balance does not increase on the same date on which
cheque has been deposited in the bank. This may cause the difference between
cash book and pass book balance.
iii) Amount directly deposited by customers/debtors in the bank account:
When the debtors of the businessman have been given the authority to deposit
the amount due from them in the firm’s account with the bank, the bank
credits the firm’s account with the amount deposited but the same amount is
not recorded in the cash book on the day it is deposited. As a result the
balance in the cash book will be less than the balance shown in the Pass
book.
iv) Bank charges charged by the Bank : The bank charges, fees or
commission from time to time for various services provided to the
customer and debits the customers’ account without intimation to the
firm/customer. As a result, the balance of the cash book will be more
than the balance of the pass book.
v) Interest and dividend received by the bank on behalf of the customer:
The interest on debentures or dividend on shares held by the account holder
is directly deposited by the company in the bank account of customer through
Electronic Clearing System (ECS). But there may not be any entry in the
cash book for such items because the firm does not get the information till it
receives the bank statement. As a consequence, the firm enters it in its cash

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Subsidiary Books book on a date later than the date on which it is recorded by the bank. As a
result, the balance as per cash book and pass book will differ.
vi) Direct payments made by the bank on behalf of the customer : The
firm may give standing instructions to its banker to make payment of
telephone bills, rent, insurance premium, taxes, etc. On making such
Notes payments, the bank will debit the firm’s account immediately, but the
firm will record the same on receiving information from the bank in
the form of Pass Book or bank statement. As a result, the balance of the
pass book is less than that of the balance shown in the bank column of
the cash book.
vii) Dishonour of cheques deposited with bank : A firm may receive a number
of cheques from its customers. Some of the cheques deposited by the firm
with the bank may be dishonoured. In this case, the Bank debits firm’s
account. But the firm records the same when it receives the information
from the bank. As a result, the balance as per cash book and that of pass
book will differ.
viii) Errors committed in recording transactions by the firm : The firm may
commit certain errors e.g., omission or wrong recording of transactions
relating to cheques deposited, cheques issued and wrong balancing etc. In
this case, there would be a difference between the balances as per Cash
Book and as per Pass Book.
ix) Errors committed in recording transactions by the Bank : The bank
may also committ errors while recording transactions in the customer’s
account, e.g., omission or wrong recording of transactions relating to
cheques deposited etc. As a result, the balance of the bank pass book
and cash book will not agree.

INTEXT QUESTIONS 8.1

I. In each of the following cases indicate the alternative which you
consider to be correct.
i. A bank reconciliation statement is prepared to know the causes
for the difference between :
a) the balance as per cash column of the cash book and pass
book
b) the balance as per bank column of the cash book and pass
book
c) neither of the two .

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ii. Bank reconciliation statement is : Subsidiary Books
a) a Ledger account
b) a part of the cash book
c) a statement separately prepared to find out the causes of
difference between bank column of cash book and pass book.
iii. A bank reconciliation statement is prepared with the help of : Notes
a) Bank pass book and bank column of cash book,
b) Bank pass book and cash column of cash book
c) Neither of the two.
II. Fill in the blanks with suitable word/words
i. The copy of customers account with the bank is
called__________
ii. The cheques deposited are entered on the __________ of the
bank column of cash book.
iii. Bank reconciliation statement is prepared to _______the bank
balance as shown by the cash book and the bank statement.
III. Given below are statements. Some of these statements are true and
some are false. Write ‘T’ for True and ‘F’ for false statements.
i. Bank credits trader’s account as soon as it receives cheques
from the firm.
ii. Bank makes certain payments on behalf of the customer under
his standing instructions.
iii. Bank charges are never entered in the cash book.
iv. Direct receipts by the bank on behalf of customer would increase
the balance shown by pass-book.
8.3 PREPARATION OF BANK RECONCILIATION
STATEMENT
Before preparing Bank Reconciliation Statement first we should check whether
balance is positive or negative.
I. Favourable balances : There are two possibilities :
a. Debit balance as per cash book is given and the balance as per
pass book is to be ascertained.
b. Credit balance as per pass book is given and the balance as per
cash book is to be ascertained.
As you have already studied that the Bank Reconciliation statement is prepared
to reconcile the differences in the balances of Cash Book and Pass Book. If
Cash Book Debit balance or balance as per cash book is given then we have to
reconcile with the balance of Pass Book.

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Subsidiary Books To reconcile the Cash Book’s balance with the balance of the Pass Book take up all
the points of differences and add all the amounts to the balance of cash book which
are credited in the Pass Book but not in the Cash Book balance and subtract all
such items which are showing less balance in Pass Book for example –
i. A cheque amounting to ` 5,000 was issued but it was not presented into
Notes the bank for payment. It shows that the Cash Book will be showing lesser
balance than Pass Book balance. Therefore, ` 5,000 will be added to the
balance of cash book & balances of both the books will be the same.
ii. On the other hand a customer of the account holder has deposited ` 3,000
directly into the Bank under standing orders of the businessman. The result
will be more balance in Pass Book then cash book’s balance. If this amount
` 3000 is added with the balance of Cash Book, then both the books will
show the same balance.
iii. In case of Bank charges etc. Pass Book’s balance is decreased by the
Bank. In such a case to reconcile the balance of the Cash Book with
Pass Book, the Cash Book’s balance will be decreased.
To summaries, it is suggested that if the balance of Cash Book is given, and we have
to reconcile with Pass Book. Then the causes of differences of all the transaction will
have to be checked and the item which are added in the balance of Pass Book will
be added, the items which are subtracted from Pass Book will be deducted from the
balance of the Cash Book, as it is clear from the above examples.
Note : If overdraft as per cash book is given, only the overdraft amount will be
written in Minus (-) colums, rest of the activities will be the same.
In case of Pass book’s credit balance or balance as per Pass Book is given, the
reverse steps will be taken to reconcile the balance of the Pass Book with Cash
Book. Same steps will be applied in case of an overdraft as per Pass Book to
reconcile with Cash Book.
Format of Bank Reconciliation Statement
Bank reconciliation statement is a statement, not an account. It can be prepared by
using various methods. Thus, different formats are used for preparing it. A simple
format of Bank Reconciliation Statement is given as follows:

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Bank Reconciliation Statement Subsidiary Books
as on ………
Particulars Plus Minus
Items (+) Items (–)
(`) (`)
Notes
Balance as per Cash Book/Pass Book (i.e. given Balance)
Add : …………………… (Effect or
…………………… causes of
……………………. Difference
Less : …………………… i.e. Plus or Minus)
……………………
……………………
Total …… ……..
Balance as per Pass Book/ Cash Book
In case Cash Book shows a credit bank balance or Pass Book shows a debit balance,
while preparing Bank reconciliation statement, it will be shown in the minus column.
The following illustrations will help you to understand the preparation of
Bank Reconciliation Statement with the favourable balance as per cash book
or pass book.
Illustration 1 (Balance as per Cash Book) :
From the following particulars of M/s ABC Ltd., prepare bank reconciliation statement
as on 31.7.2012
i. Bank balance as per cash book ` 62,500
ii. Cheques deposited into bank but not credited upto 31.7.2012 ` 8,900
iii. Cheques issued but not presented for payment till 31.7.2012 ` 12,500
iv. Bank credited ` 5,000 for receiving dividend.
v. Bank charges debited by Bank ` 400.
Solution
Bank Reconciliation Statement of M/s ABC Ltd.
As on July 31, 2012
Particulars (Plus) (Minus)
(`) (`)
i. Balance as per cash book 62,500
ii. Cheques deposited but not credited by the Bank 8,900
iii. Cheques issued but not presented for payment 12,500

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Subsidiary Books iv. Dividend received 5,000
v. Bank charges debited by bank 400
Balance as per pass book 70,700
Total 80,000 80,000
(as the total of plus column is greater than
Notes the total of minus column.)
Illustration 2 (Balance as per Cash Book)
From the following particulars of Deep Traders, prepare a bank reconciliation
statement on June 30, 2012.
i. Balance as per the cash book ` 1,00,000
ii. Cheques for ` 17,550 are deposited in the bank but not yet collected by the
Bank.
iii. ` 5250 charges for Credit Card fee is debited by bank, which is not recorded
in cash book.
iv. There was also a debit in the pass book of ` 40,000 in respect of a discounted
bill dishonoured.
Solution
Bank Reconciliation Statement of M/s Deep Traders
as on June 30, 2012
Particulars (Plus) (Minus)
(`) (`)
i. Balance as per cash book 1,00,000
ii. Cheques deposited but not credited by the Bank 17,550
iii. Credit card fee charges debited by the Bank 5,250
iv. Discounted bill dishonoured recorded only
in Pass book. 40,000
Balance as per Pass Book 37,200
Total 1,00,000 1,00,000

Ilustration 3 (Balance as per Pass Book)

From the following particulars of M/s XYZ Ltd., prepare bank reconciliation statement
as on 31.7.2012.
i. Balance as per pass book i.e. ` 70,700 as the starting point.
ii. Cheques deposited into bank but not credited upto 31.7.2011 ` 8,900
iii. Cheques issued but not presented for payment till 31.7.2011 ` 12,500.
iv. Bank credited ` 5,000 for receiving dividend.
v. Bank charges debited by Bank ` 400

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Solution Subsidiary Books
Bank Reconciliation Statement of M/s XYZ Ltd.
As on 31st July 2012
Particulars (Plus) (Minus)
(`) (`) Notes
i. Balance as per pass book 70,700
ii. Cheques deposited but not credited by the Bank 8,900
iii. Cheques issued but not presented for payment 12,500
iv. Dividend received 5,000
v. Bank charges debited by bank 400
Balance as per cash book 62,500
Total 80,000 80,000
Illustration 4 (Balance as per Pass Book)
Bank Pass book of M/s Telemax Industries showed a credit balance of ` 1,27,350
on July 31,2012. The following differences were found on that date between
the cash book and the pass book balances :
i. Cheques issued before July 31, 2012, amounting to ` 79,000 had not
been presented for payment.
ii. Two cheques of ` 5,000 and ` 3,500 were deposited into bank on July
31, but the bank credited for the same in August.
iii. Insurance premium directly paid by bank ` 5,000
iv. ` 2,000 wrongly debited to the firm account by the Bank.
Prepare Bank Reconciliation Statement as on July 31, 2012.
Solution
Bank Reconciliation Statement of M/s Telemax Industries
As on July 31, 2012
Particulars (Plus) (Minus)
(`) (`)
i. Balance as per Pass Book 1,27,350
ii. Cheques issued but not presented for payment 79,000
iii. Cheques deposited but credited by the
bank in August. 8,500
iv. Insurance premium directly paid by Bank 5,000
v. Wrongly debited by the bank. 2,000
Balance as per cash book 63,850
Total 1,42,850 1,42,850
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Subsidiary Books II. When there is a Situation of Bank Overdraft
When there is overdraft as per Cash Book or Pass Book it will be written in the
Minus Column as it is a negative balance. Different items will be accordingly
added or subtracted from the given overdraft as the case may be. However, it
may be noted that when overdraft is treated as a negative balance and written
Notes in the minus column, all those items which appear in the minus column get
added to it automatically. Similarly, all items written in the plus column get
deducted out of it.
Illustration 5 (Overdraft as per Cash Book)
From the following particulars, ascertain the balance as would appear in the
Pass Book of Manav Industrial Works on 31st July, 2012.
i. Credit Balance as per Cash Book on 31st July,2012 was ` 4,299
ii. Cheques issued but not cashed prior to 31st July, 2012 amounted to ` 1,151
iii. Cheques paid into Bank but not collected before 31st July amounted to ` 858
iv. There was a debit of ` 40 for Bank charges in the Pass Book.
Solution
Bank Reconciliation Statement of Manav Industrial Works
As on 31 July 2012
Particulars Amount Amount
(`) (`)
Overdraft as per Cash Book 4,299
i. Cheques issued but not yet presented for payment 1,151
ii. Less cheques paid into Bank but not collected 858
iii. Bank Charges recorded in Pass Book only but
not in cash Book. 40
Overdraft as per Pass-Book 4046
Total 5197 5197
Illustration 6 : (Overdraft/Unfavourable balance as per pass book)
From the following particulars of Aman and Sons prepare bank reconciliation
statement as on 31st December, 2012
`
i. Overdraft as per pass book (31 Dec., 2012)
st
10,000
ii. Cheques issued but not presented 6,000
iii. Cheques deposited but not collected 1,800
iv. Dividends collected and credited by the bank which did not 500
appear in the cash book

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v. Bank charges debited in the pass book but not yet recorded in 200 Subsidiary Books
the cash book
vi. A bank draft on the request of Aman was issued by the bank
which has not been recorded in the cash book. 1,000
Solution
Bank Reconciliation Statement Notes
As on 31st December, 2012
Particulars Plus Minus
(`) (`)
Overdraft (Dr. balance) as per Pass Book 10,000
Add: i. Cheques paid into bank but not collected 1,800
ii. Bank charges debited in pass book 200
iii. Draft issued by bank not recorded
in the cash book 1,000
Less: i. Cheques issued but not presented for payment 6,000
ii. Dividend collected and credited by bank 500
Cr. Balance as per Cash Book 13,500
Total 16,500 16,500
Illustration 7 : (Unfavourable balance of pass book)
Prepare Bank Reconciliation statement from the following :
`
i. Overdraft as per Pass Book on 31 Dec., 2012
st
5,200
ii. Cheque issued but not presented 1,200
iii. Interest collected by bank 500
iv. Interest charged on overdraft 430
v. Bank column of receipt side of Cash Book is overcast 100
vi. Bank column of payment side of Cash Book is undercast 40
vii. Bank issued draft to supplier as per instruction 2,000
viii. A cheque of ` 600 banked and credited, but omitted to be
recorded in Cash book
Solution
Bank Reconciliation Statement
As on 31st December, 2012
Particulars Plus Minus
(`) (`)
Overdraft as per Pass Book 5,200
Add : (i) Interest Charged by bank on overdraft 430

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Subsidiary Books (ii) Bank column of receipt side of cash book
is overcast 100
(iii) Bank column of payment side of cash
Bank is undercast 40
(iv) Bank issued a draft 2,000
Notes Less: (i) Cheque issued but not presented 1,200
(ii) Interest collected by bank 500
(iii) Cheque credited in bank omitted to
recorded in Cash Books 600
Overdraft as per Cash Book 4,930
Total 7,500 7,500
Illustration 8 : (Unfavourable balance as per Cash Book)
Prepare a Bank Reconciliation Statement from the following particulars:
i. On 31st March, 2012, the Cash Book showed a credit bank balance (i.e.,
bank overdraft) of ` 2,000
ii. Out of the total cheques amounting to ` 20,000 drawn, cheques aggregating
` 13,000 were encashed in March, cheques aggregating ` 4,000 were
encashed in April and the rest have not been presented at all.
iii. Out of the total cheques amounting to ` 15,000 deposited, cheques
aggregating ` 11,500 were credited in March, cheques aggregating ` 2,000
were credited in April, and the rest have not been collected at all.
iv. The bank has debited ` 1,500 on account of interest on overdraft and Rs.
100 as bank charges.
v. The bank has credited ` 1,700 on account of interest collected on securities.
vi. A Bill Receivable of ` 1,000 (discounted with the bank in January) dishonoured
on 31st March (but not yet recorded in the Cash Book).
Solution
Bank Reconciliation Statement
As at 31st March, 2012
Particulars Plus Minus
(`) (`)
Overdraft as per Cash Book (Cr.) 2,000
(i) Cheques drawn but not presented for
payment till 31st March 7.000
(ii) Interest on securities collected by the Bank 1,700
(iii) Cheques deposited but not collected
till 31st March 3,500
(iv) Interest on overdraft and bank charges 1,600
(v) Discounted bill receivable dishonoured 1,000
Overdraft as per Pass Book (Cr.) 600
Total 8,700 8,700

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Illustration 9 : (Unfavourable balance as per Cash Book) Subsidiary Books
Comparing Ram’s Cash Book with the Bank Statement of his account for the month
of November, 2012 the followings were noticed :
i. Cash Book showed an overdraft of ` 45,000.
ii. A cheque for ` 17,500 drawn on his saving account has been shown as
drawn on his Current Account. Notes
iii. Cheques amounting to ` 70,000 drawn and entered in the Cash Book
have not been presented.
iv. Cheques amounting to ` 60,000 sent to the bank for collection, which though
entered in the Cash Book have not been credited by the bank.
v. Bank charges of ` 1,750 as per Bank Statement have not been recorded
in the Cash Book.
vi. Payment side of the Cash Book was by under cash ` 1,500.
vii. ` 35,000 dividend were collected by the bank on behalf of the customer.
Solution
Bank Reconciliation Statement
As at 30th November, 2012
Particulars Plus Minus
(`) (`)
Overdraft as per Cash Book (Cr.) 45,000
i. Payment side of the Cash Book is undercast 1,500
ii. Cheques drawn on saving account but wrongly
shown as drawn on Current Account 17,500
iii. Cheques issued but not yet presented for payment 70,000
iv. Cheques paid into the bank but not yet credited 60,000
v. Bank charges 1,750
vi. Direct payment of dividend into the bank 35,000
Overdraft as per Pass Book (Cr.) 14,250
Total 1,22,500 1,22,500
Illustration 10 : (Overdraft as per Pass Book)
On March 31, 2012 there is an Overdraft of ` 15,000 in the Pass Book of Sh.
Jagdish Kumar. On comparison with the Cash Book, it was found that
i. The bank has charged interest on overdraft for ` 600.
ii. Cheques for ` 80,000 were issued and out of these cheques only for
` 8,000 have been encashed.
iii. Cheques for ` 4,500 were deposited into bank but cheques for ` 500
only were cleared.
iv. The bank collected interest on his investments ` 600 and a direct payment
was made into his account by a debtor of ` 900.
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Subsidiary Books v. He had received a cheque for ` 1,200 which he entered in the Cash Book
but he forgot to send the cheque to the bank.
Prepare Bank Reconciliation Statement.
Solution
Bank Reconciliation Statement
Notes As on March 31, 2012
Particulars Plus Minus
(`) (`)
Overdraft as per Pass Book 15,000
i. Interest on overdraft 600
ii. Cheques issued but not presented for payment
(` 80,000 – ` 8,000) 72,000
iii. Cheques deposited but not cleared and collected
(` 4,500 – ` 500) 4,000
iv. Interest collected by the bank 600
v. Direct payment into the bank 900
vi. Cheques entered in Cash Book but not
sent to Bank 1,200
Overdraft as per Cash Book 82,700
(because ‘minus’ column total is more than ‘plus’column)
Total 88,500 88,500
Illustration 11 : (Overdraft as per Pass Book)
On March 31, 2012 the pass book of Rajat showed an overdraft of ` 5,000. The
following discrepancies were noted on comparing with the Cash Book :
i. Cheques issued before March 31, 2012 for ` 1,900 were presented for
payment on April 4, 2012.
ii. Cheques for ` 8,200 deposited in the bank but cleared on April 2, 2012.
iii. Interest on overdraft ` 1,500 but it doesn’t appear in Cash Book.
iv. Dividend of ` 6,000 collected by bank and entered in Pass Book. This
is not there in Cash Book.
v. Locker rent ` 80 not entered in Cash Book.
vi. A cheque of ` 7,800 was dishonoured but it does not appear in Cash Book.
Prepare Bank Reconciliation Statement as on March 31, 2012.

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Solution Subsidiary Books
Bank Reconciliation Statement
As on March 31, 2012
Particulars Plus Minus
(`) (`)
Notes
Overdraft as per Pass Book 5,000
i. Cheques issued but not presented for payment 1,900
ii. Cheques deposited but not yet cleared 8,200
iii. Interest on Overdraft 1,500
iv. Dividend collected by the bank 6,000
v. Locker rent charged by bank. 80
vi. Cheques dishonoured 7,800
Balance as per Cash Book 4,680
(as total of ‘plus’ column is more than that of ‘minus’ column)
Total 17,580 17,580
Illustration 12 : (Overdraft as per Cash Book)
On September 30, 2012 there was an Overdraft at ` 7,700 as per the Cash book of
a businessman. When it was compared with Pass Book it was discovered that:
i. Cheques amounting to ` 3,500 were paid into Bank but those for only
` 1,000 were credited in Pass Book so far.
ii. Cheques amounting to 6,500 were issued in September but only cheques
of ` 2,650 were presented for payment.
iii. A cheque received for ` 2,000 was entered in the Cash Book but was not
sent to the bank at all.
iv. There is a debit in the Pass Book for ` 65 for bank charges and ` 35 for interest.
v. ` 2,400 have been directly deposited into bank by somebody. It does
not appear in the Cash Book.
vi. Insurance premium has been paid by the bank ` 1,500 under his standing
instructions.
Prepare Bank Reconciliation Statement as on September 30, 2012.
Solution
Bank Reconciliation Statement
As on September 30, 2012
Particulars Plus Minus
(`) (`)
Overdraft as per Cash Book 7,700
i. Cheques deposited but not cleared
(` 3,500 – ` 1,000) 2,500

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Subsidiary Books ii. Cheques issued but not enchased till date
(` 6,500 – ` 2,650) 3,850
iii. Cheque entered in Cash Book but not sent to bank. 2,000
iv. Bank charges 65
v. Interest charged by bank 35
Notes vi. Amount directly deposited by some customer 2,400
vii. Insurance premium paid by Bank under his standing
Instruction. 1,500
Overdraft as per Pass Book 7,550
(because the total of ‘minus’ column is more than the total
of ‘plus’ column).
Total 13,800 13,800

INTEXT QUESTIONS 8.2

I. You are given the balance as per Pass Book and balance as per
Cash Book is to be ascertained by you. Out of the following
transactions, write ‘A’ against those amounts which will be added to
the balance of Pass Book and ‘R’ against those by which balance of
Pass Book will be reduced.
i. Bank charges.
ii. Cheques issued but not encashed.
iii. Cheques deposited with bank and dishonoured
II. Multiple Choice Questions
i. Which of the following is a correct statement related to ‘bank
reconciliation statement’.
a) It is prepared after every month.
b) It is prepared after every six month.
c) It is prepared at the end of the year.
d) It is prepared periodically.
ii. If balance as per Cash Book is ` 8000. Cheque of ` 5000 and
cheque of ` 18000 were issued, but were not presented for payment
what will be the balance as per pass book after reconciliation?
a) ` 8000 b) ` 13000
c) ` 23000 d) ` 31000
iii. While preparing bank reconciliation statement from the pass book
balance which of the following items will be subtracted?
a) Cheques deposited but not credited.
b) Cheque issued but not presented for payment.
c) Bank Charges d) Insurance Premium paid by the bank.
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iv. Which of the following statements related to bank reconciliation Subsidiary Books
statement is correct?
a) It is prepared to ascertain profit of the business concern.
b) It is prepared to calculate the balance as per cash book at the
end of the month.
c) It is prepared to reconcile the balance as per cash book and Notes
as per pass book.
d) It is prepared to ascertain the financial position of the business.
v. The pass book shows a debit balance of ` 4,500 and a customer has
directly deposited ` 2,000 in the bank account which is not recorded
in cash book. What will be the balance as per cash book?
a) ` 6,500 b) ` 2,500 (for favourable)
c) ` 6,500 (over draft) d) ` 2,500 (overdraft)

WHAT YOU HAVE LEARNT

• Bank Reconciliation Statement is a statement prepared, periodically with the
purpose to enlist the reasons of difference between the balances as per the
bank column of the cash book and pass book on any given date.
• A Bank Reconciliation Statement is a statement reconciling the balance as
shown by the bank passbook and the balance as shown by the Bank column
of the Cash book. The objective of preparing such a statement is to know the
causes of difference between the two balances and to reconcile them.
• The reasons for difference in balance of the cash book and pass book are
as under:
→ Cheques issued by the Trader but not yet presented for payment
→ Cheques deposited into Bank but not yet collected or credited by
the Bank
→ Amount directly deposited by customers in the Bank account
→ Bank Charges charged by the Bank
→ Interest and dividend received by the Bank
→ Direct payments made by the Bank on behalf of the customers
→ Dishonour of Cheques/Bill discounted
→ Errors committed in recording transactions by the firm
→ Errors committed in recording transactions by the Bank

TERMINAL EXERCISE
1. What is meant by a Bank Reconciliation Statement?
2. What is the need of preparing Bank Reconciliation Statement?
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 MODULE - II Bank Reconciliation Statement
Journal and Other
Subsidiary Books 3. Enumerate the causes of difference in the balances of cash book and pass
book.
4. From the following particulars, prepare Bank Reconciliation Statement
as on December 31, 2012.
(i) Balance as per Cash Book ` 4,200
Notes (ii) Cheques issued but not presented for payment ` 2,000
(iii) Cheques deposited but not collected ` 3,000
(iv) Bank Charges debited by the Bank ` 250
5. Prepare Bank Reconciliation statement as on March 31, 2012. On this
date the passbook of M/s Birla Industries showed a balance of ` 27,500
(a) Cheques of ` 14,000 directly deposited by a customer.
(b) Cheques for ` 13,500 were issued during the month of March
but of these cheques for ` 1,500 were not presented by the end
of March.
(c) The Bank collected ` 2,500 as dividend on shares.
(d) Cheques of ` 17,500 were paid into bank but of ` 8,500 were
realised in the month of April, 2012.
6. From the following particulars, ascertain the balance as would appear
in the Pass Book of Adani Industrial works on 31st January, 2012.
(a) Balance as per Cash Book on 31st January 2012 was ` 4,000
(b) Cheques issued but not cashed prior to 31st January, 2010
amounted to ` 1,000
(c) Cheques paid into Bank but not collected before 31st January
amounted to ` 800.
(d) There was a debit of ` 400 for Bank charges in the Pass Book.
7. From the following particulars prepare Bank Reconciliation statement
as on 31st March, 2012 :
i. Overdraft as per Cash Book ` 12,500
ii. Cheques of ` 18,000 were issued but were not presented for payment.
iii. Cheques of ` 24,000 were paid into bank but wore not credited till
31 March 2012.
iv. Bank charges ` 1,500.
8. The bank column of a Cash Book showed a debit balance of ` 1,49,000
on June 30, 2012. Entries in the Cash Book and the Pass Book were
compared and the following differences were noticed:
i. Cheques of Shyam ` 9,000 and of Mohani ` 15,000 were deposited
but were not collected upto June 30, 2012.
ii. Ram, a creditor, deposited a cheque of ` 8,000 directly into the
bank.
iii. Bank allowed an interest of ` 1,500.

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 Bank Reconciliation Statement MODULE - II
Journal and Other
iv. Cheque for ` 10,000 issued to Radhey was not presented for Subsidiary Books
payment.
v. Bank debited the account by ` 8,000, being insurance premium.
vi. Bank debited the account by ` 700, being bank charges.
You are required to prepare a Bank Reconciliation Statement as on
June 30, 2012. Notes
9. From the following particulars ascertain the balance that would appear
in the Bank Pass Book of Arun on 31st March, 2012.
i. The bank overdraft as per Cash Book on 31st March, 2012 ` 60,200
ii. Interest on overdraft for 6 months ending 31st March, 2012, ` 10,000
entered in the Pass Book.
iii. Bank charges of ` 1,300 for the above period are debited in the
Pass Book.
iv. Cheques issued but not cashed prior to 31 st March, 2012,
amounted to ` 10,620.
v. Cheques paid into the bank but not cleared before 31st March,
2012, were for ` 16,500.
vi. Interest on investment collected by the bank and credited in the
Pass Book, ` 11,000
10. From the following particulars, prepare a bank reconciliation statement
as on 31-3-2012:
i. Balance as per pass book on 31st March, 2012 overdrawn ` 10,266.
ii. Cheques drawn on 31st March, 2012 but not cleared till 2nd April,
2012, ` 120; ` 10,211; ` 981 and ` 1,128.
iii. Interest on bank overdraft not entered in the cash book ` 1,510.
iv. Out-station cheques for ` 21,000 lodged in the bank on 30th
March, 2012 but credited in April, 2012.
v. ` 100 being chamber of commerce subscription paid by the
bank under a standing order on 31st March, 2012 was not entered
in the cash book.
vi. A hundi of ` 2,500 due on 31st March, 2012 was sent to the
bank for collection on 29th March, 2012 and entered in the cash
book forthwith, but the proceeds thereof were not credited in
the pas book till 2nd April, 2012.
11. Prepare a bank reconciliation statement from the following particulars:
On 31st December, 2016 I had overdraft of ` 750 as shown by my
pass book. I had issued cheques amounting to ` 250 of which `
200 worth only seem to have been presented for payment. Cheques
amounting to ` 100 had been paid in by me on 30th December, but
of these only ` 75 were credited in the pass book. I also find that a

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 MODULE - II Bank Reconciliation Statement
Journal and Other
Subsidiary Books cheque for ` 10 which I had debited to bank account in my books has
been omitted to be banked. There is a debit in my pass book of ` 25
for interest. An entry of ` 30 of a payment by a customer direct into
the bank appears in the pass book. My pass book also shows a credit
of ` 60 to my account for interest on investments directly collected by
Notes my bankers.
12. The pass book of Rita & Sons showed a balance of ` 8,500 on 31st
May, 2012. Cheques amounting to ` 2,750 were deposited into the
bank on 27th May but Cheque worth ` 510 were credited on 2nd June
and one cheque of ` 150 was returned by them as dishonoured on 5th
June. Cheques drawn but not presented for payment amounted to `
6,000. A B/P paid by the bank but not entered in the cash book ` 1,500.
Credit side of bank column of cash book was cast ` 100 short. Preeti
Bros. the firm’s agent were requested to remit ` 4,000 through telegraphic
transfer but they have remitted only ` 2,500 for which there was no entry
in the cash book. Find out the balance as per cash book and ascertain the
correct balance of cash book as on 31-5-2012.
13. On 30th June, 2012 the cash book of a merchant disclosed a balance of
` 5,820. On checking entries in the cash book with the bank statement,
it was ascertained that :
i. Cheque for ` 2,200 deposited into bank, had not yet been cleared.
ii. Cheques issued but not presented for payment ` 1,600.
iii. A dividend of ` 380 by collected to the bank had not been
recorded in the cash book.
iv. Bank charges ` 40 have not been recorded in the cash book.
v. A B/R of ` 2,500 discounted with the bank is entered in the
cash book without recording the discount charge of ` 100
You are required to prepare a bank reconciliation statement.
14. From the following particulars, prepare a bank reconciliation statement
as on 31st March, 2012 and show necessary adjustments in cash book
to find out correct balance:
i. Bank balance as per pass book (overdraft) ` 3,000.
ii. A cheque of ` 2,000 was credited in the pass book on 28-3-2012, later
dishonoured and was debited in the pass book on 1-4-2012. There was
no entry of this dishonoured cheque in the cash book within the date.
iii. The bank collected ` 1,000 by way of interest and credited the
amount but the same was not recorded in the cash book within
31st March, 2012.
iv. A cheque of ` 25,000 was lodged in the bank on 31st March, 2012
but the same was credited in the pass book only on 7th April, 2012.

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 Bank Reconciliation Statement MODULE - II
Journal and Other
v. Of the cheques drawn on 28th March, 2012 for ` 8,000, a cheque of Subsidiary Books
` 2,000 was presented for payment on 7th April, 2012.
vi. On scrutiny it was further found that the banker has given a wrong
credit for ` 500 and a wrong debit for ` 200 in the pass book which
have not been recorded in the cash book within 31st March, 2012.
Notes

ANSWER TO INTEXT QUESTIONS

8.1 I. i) b ii) c iii) a
II. i) pass book ii) Debit side iii) reconcile
III. i) F ii) T iii) F iv) T.
8.2 I. i) A ii) R iii) A
II. i) d ii) d iii) b iv) c v) c

ANSWER TO TERMINAL EXERCISE

4. Balance as per Pass Book ` 2,950.
5. Balanc as per Cash Book ` 18,000.
6. Balance as per Pass Book ` 4,600.
7. Overdrafts per Pass Book ` 20,000.
8. Balance as per Pass Book ` 1,35,800.
9. Overdraft as per Pass Book ` 66,380.
10. Overdrafts as per Cash Book ` 2,404.
11. Overdrafts as per Cash Book ` 830.
12. Balance as per Cash Book ` 2,260.
13. Balance as per Pass Book ` 5,460.
14. Balance as per Cash Book ` 19,300.
ACTIVITY FOR YOU
• Visit any nearby business establishment. Compare its Cash Book (bank
column) with the Pass Book. Find out the entries which have been
made in the Cash Book but not in the Pass Book and also the entries
which have been made in the pass book but not in the Cash Book. Make a
list of these entries along with the amount involved.

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