BRS Bank Reconciliation Statement: Practice and Problem Solving

Bank Reconciliation Statement (BRS) is one of the most frequently tested topics in CA Foundation Accounting. It combines conceptual understanding with practical problem-solving. Let's master it thoroughly.

What Is Bank Reconciliation?

A bank reconciliation statement is prepared to identify differences between:

These balances often differ due to timing differences and errors. BRS bridges this gap.

Why Differences Exist

**Timing Differences** (Most Common):

- Company records cheque in cash book immediately

- Bank records it only when check is presented and cleared

- Bank statement shows higher balance temporarily

- Company records deposit in cash book

- Bank credits account only after clearance (2-3 working days)

- Company shows higher balance temporarily

- Bank records standing instructions, loan EMIs, interest

- Company learns only from bank statement

- Both records have differences until company updates

- Bank deducts charges without informing company

- Company learns from monthly statement

**Errors** (Rare but Possible):

Two Methods of Reconciliation

Method 1: Bank Statement to Cash Book Balance

Starting Point: Bank Statement Balance

Add: Cheques deposited but not cleared

Less: Cheques issued but not presented

Less: Bank charges and interest debited

Add: Interest and credits directly made by bank

= Cash Book Balance (bank column)

Method 2: Cash Book Balance to Bank Statement Balance

Starting Point: Cash Book Balance (bank column)

Add: Cheques issued but not presented

Less: Cheques deposited but not cleared

Add: Bank charges and interest debited by bank

Less: Interest and credits directly made by bank

= Bank Statement Balance

**Most Common**: Method 2 (starting from cash book)

Practical Problem 1: Basic BRS

**Given Information**:

**Differences**:

**Solution** (Method: Cash Book to Bank Statement):

Starting: Cash Book Balance (Dr.) = Rs. 15,000

Add: Cheques issued but not presented = Rs. 4,000

(Company recorded debit, bank hasn't yet, so add back)

= Rs. 19,000

Less: Cheques deposited but not credited = Rs. (1,500)

(Company recorded credit, bank hasn't yet, so deduct)

= Rs. 17,500

**This matches Bank Statement!** ✓

Note: Bank charges (Rs. 200) and Interest (Rs. 300) don't cause reconciliation difference—they cause difference in cash book vs. bank. Company must adjust its cash book for these.

Practical Problem 2: Complex BRS with Multiple Items

**Given**:

**Details**:

**Solution**:

Step 1: Adjust Cash Book

Unadjusted Cash Book: Rs. 50,000

Less: Rent (standing instruction): Rs. (2,000)

Add: Dividend credited: Rs. 1,000

Adjusted Cash Book: Rs. 24,000

**Step 2: Prepare BRS** (Adjusted Cash Book to Bank Statement)

Adjusted Cash Book Balance: Rs. 24,000

Add: Cheques issued but not presented:

- Rs. 10,000

Sub-total: Rs. 34,000

Less: Cheques deposited but not credited: Rs. (8,000)

Bank Statement Balance: Rs. 26,000

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