Bank Reconciliation Statement | Class 11 Accountancy Notes

Bank Reconciliation Statement

In business organizations, cash and bank transactions are recorded in a cash book, which serves as both a cash account and a bank account. The cash book shows balances of cash and bank at the end of a period. However, to ensure accuracy, the balance as per the cash book must be compared with the bank's records, typically obtained through a bank statement or passbook. A bank passbook is a copy of the bank account as maintained by the bank and reflects all deposits (credits) and withdrawals (debits) made in the account. The balance shown in the passbook must ideally match the balance shown in the cash book. However, in practice, these balances often differ due to timing differences and errors. The bank statement shows deposits in the credit column and withdrawals in the debit column; if deposits exceed withdrawals, it shows a credit (favourable) balance, and if withdrawals exceed deposits, it shows a debit (overdraft) balance. This chapter introduces the concept of Bank Reconciliation Statement (BRS), which is prepared to reconcile these differences and ascertain the correct bank balance.

📊 Diagram: Figure 5.1 Specimen of bank statement (current account)

🧪 Activity: Obtain a recent bank statement or passbook and compare the balance with the cash book balance to observe differences.

🔗 Connection: Leads to the need for reconciliation by explaining why cash book and passbook balances differ.

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