A bank reconciliation statement is prepared periodically to reconcile the two balances and explain the reasons for the difference between them. In general, the cash book balance differs from the passbook balance due to some of the transactions present in the passbook are not yet recorded into the cashbook. This article explains the difference between cash book and pass book. What are some reasons that cause the balance on the bank. Bank reconciliation interview questions and answers guide. Sep 11, 20 objectives explain the meaning of cash book, pass book, and petty cash book.
What are the important things to be remembered while preparing a bank reconciliation statement. Difference between a cash book balance and bank statement. Reconciliation of the cash book and the bank passbook balances amounts to an explanation of differences between them. Jan 08, 2018 the paramount differences between cash book and pass book are explained in the given below points. Bank reconciliation statement in short brs, is an explanation of the difference between bank balance as per cash book and bank balance as per passbook bank statement. While preparing the bank reconciliation statement, the date of issue of cheque and presentation of the cheque to the bank for payment will vary.
Bank reconciliation statement is a statement prepared to reconcile and explain the causes of disagreement between the bank balance as per cash book and the same as per pass book or bank statement as on a particular date. The statement is known as the bank reconciliation statement. Bank charges charged by the bank only entered in the passbook and not in the cashbook. The booktobank reconciliation status for that bank statement is changed to awaiting confirmation. Preparing the bank reconciliation statement 2 methods. Give reasons for differences between the cash book and pass book balances.
If one looks at the debit side of the cash book and the deposits column of the pass book, and checks item by item, one. We have to check all the transaction recorded in the cash book with transactions recorded in passbook by our bank. At the end of every month entries in the cash book are compared with the entries in the pass book. Jan 16, 2019 bank reconciliation cheat sheet join me in this episode of accounting basics for beginners as i show you how to do a bank reconciliation from scratch. Feb 28, 2019 bank reconciliation cash book serves the purpose of cash account and bank account of the firm. The double column cash book also known as two column cash book has two money columns on both debit and credit sides one to record cash transactions and one to record bank transactions. Bank reconciliation statement part1 class 11th accounts. Causes of differences between the cash book and the pass book are. In other words, we can say that if we add a bank column to both sides of a single column cash. Need for reconciliation timing differences cheques issued by the bank but not yet presented for payment cheques paid into the bank not yet collected direct debits made by the bank on behalf of the. Bank reconciliation statement process illustration. If the balance is taken as per the cash book then the following items will be added. Reconciliation is a fundamental account process that ensures the actual money spent matches the money leaving an account at the end of a fiscal period.
Difference between cash book and passbook with comparison. If the balance of the cash book is taken as a starting point then cash book balance is to be adjusted in accordance with the entries passed in the bank pass book and vice versa. The need for preparation of brs arises only when there is a difference in the bank ac balance as revealed by the cash book and the bank balance as shown by the pass book issued by the bank. One copy of this statement is also sent to the bank if the bank has made some errors or mistakes in the pass book. The bank reconciliation statement is an additional statement that is prepared to serve some purpose, i. Here we detail about the eleven major causes of difference between cash balances of bank and cash book. The need for preparation of brs arises only when there is a difference in the. Bank reconciliation statement is a statement prepared to reconcile the balances of cash book maintained by the concern and pass book maintained by the bank at periodical intervals. There is a slight difference between cash book and passbook, that is. Bank reconciliation statement is generally prepared at the end of the month or the year and it is not necessary when there is no disagreement between the pass book balance and the cash book balance. The paramount differences between cash book and pass book are explained in the given below points. Interest on deposit allowed by the bank entered in the passbook but not in cash book. Bank reconciliation statement brs is prepared as and when needed.
Explain the process of preparing bank reconciliation statement with amended cash balance. If one looks at the debit side of the cash book and the deposits column of the pass book, and checks item by item, one will find that the following cheques deposited with the bank. Receipts are recorded on the debit the left hand side, and payments are recorded on the credit right hand side. Cash book refers to the book maintained by the customer at his end wherein the entries affecting the bank balance are recorded immediately irrespective of the fact as regards realisation of the cheque or debit of the cheques issued by him. All the cash transactions as well as bank transactions are recorded here. A business firm periodically prepares a bank reconciliation statement to reconcile the bank balance as per the cash book with the passbook as these two show different balances for various reasons.
Entries in the cash book are then posted into the general. A bank reconciliation is a monthly process by which we match up the activity on the bank statement to ensure that everything has been recorded in the companys or individuals books. Bank reconciliation cheat sheet join me in this episode of accounting basics for beginners as i show you how to do a bank reconciliation from scratch. What is the need for a bank reconciliation statement. Cash book, pass book, bank reconciliation statement dr. It is not a part of accounts or double entry system. So, if the bank columns of the cash book show a debit balance as on a specified date, the bank statement should show an equal.
Here we detail about the two ways for preparing the bank reconciliation statement, i. The causes of differences in balances of both the books are. All transactions related to bank are recorded in the bank column of the cash book and these transactions are also recorded in the pass book by the bank. Now we shall move to study the steps taken in preparation of bank reconciliation statement in each of the above cases. The post office savings bank introduced passbooks to rural 19th century britain. Sometimes, the bank balance as per cash book and passbook does not tally with each other, then we can know the difference between them by preparing the bank reconciliation statement. Double column cash book explanation, format, example. Normally a firm make payments through bank, it means a cheque or a demand draf.
Differences between cash balances of bank and cash book. A bank reconciliation statement is a statement prepared as part of the reconciliation which sets out the entries which have caused the difference between the two balances. As we all engage in more automatic and electronic transactions, this is a critically important step to ensure that the cash balance is correct. What is the difference between a cash book and a passbook. Bank reconciliation statement in short brs, is an explanation of the difference between bank balance as per cash book and bank balance as per passbookbank statement. Cash book is prepared by the firms whereas passbook is written by banks and retained by the customer. Subscribe to our youtube channel to watch more accounting lectures. What are the causes of disagreement between cash book and pass book. A bank reconciliation statement is a process by the help of which the bank tries to find out if theres a difference in between the record of bank account and that of the consumers account for a specified date or not.
A bank reconciliation is a statement prepared mainly to reconcile the differences shown between the bank column of the cash book and the pass book. Explain the reasons which cause pass book of the bank and your bank book not tally. Explain the meaning, need and importance of bank reconciliation statement. The differences between the cash book and the bank passbook is caused by. Now as you are studying accountancy instead of a, b, c, let me assume that you are grown enough to know what a passbook is. The objective of preparing a brs bank reconciliation statement is not to. State the need for the preparation of bank reconciliation statement. I preparation of bank reconciliation statement without. Main purpose of bank reconciliation statement is to match companies transactions with the bank. A cash book is a type of subsidiary book where cash or bank receipts and cash or bank payments made during a period are recorded in a chronological order. The relationship between the customer and the banker is that of a creditor and a debtor. Why is a bank reconciliation statement is prepared answers. Cheques issued but not presented for payment will reduce the balance as per the passbook. So, if the bank columns of the cash book show a debit balance as on a specified date, the bank statement should show an equal amount of credit balance as on that date and viceversa.
Distinction between cash book and pass book, accounting lecture. Mp board class 11th accountancy important questions. Discuss the causes for difference between the balances of pass book and cash book. A statement prepared to reconcile the bankbalance as per cash book with the balance as per passbook or bank statement,by showing the items of difference between the two accounts.
Discuss the causes for difference between the balances of pass book and cash. Reasons for difference between bank balances as per cash book and pass book. Bank reconciliation statement financial accountingi. Explain the advantages of bank reconciliation statement. The aim is to make sure all transactions are accounted. Cheques recorded in cash book but not yet credited by bank. A bank reconciliation statement is a statement prepared by the entity as part of the reconciliation process which sets out the entries which have caused the difference between the two balances. The need to prepare a brs arises due to the following reasons.
This enables you to make any necessary changes to the data and click the recalculate link on the book to bank reconciliation page to run the book to bank reconciliation application engine program again. Financial accounting a presentation on cash book, pass book, bank reconciliation statement presented by. Preparing a bank reconciliation financial accounting. Sometimes the bank balances as per cash book and bank statement. Distinguish between bank pass book and bank statement.
Patel id 20 flow of presentation introduction objectives cash book types of cash book simple cash book two column cash book three column cash book petty cash book pass book bank reconciliation statement meaning causes for difference between cash. Traditionally, a passbook is used for accounts with a low transaction volume, such as a savings account. One copy of this statement is also sent to the bank if the. Cash book is written by depositor and pass book is written by the bank. Bank reconciliation statement 153 reconciliation of the cash book and the bank passbook balances amounts to an explanation of differences between them. Cheques deposited entered in the cash book, but forget to sent the bank. Passbook is issued by the bank to the account holder that records the deposits and withdrawals. A bank reconciliation compares the bank statement and our companys records and reconciles or balances to two account balances. Objectives explain the meaning of cash book, pass book, and petty cash book. Bank balance as per cash book of a trader as on 31st dec. Prepare bank reconciliation statement on dated december 31, 2014. The cash book shows a balance of rs 33,000, whereas the pass book shows a balance of rs 39,930. We need to do a bank reconciliation to find out why there is a difference. Bank reconciliation statement is prepared either by starting with the bank pass book balance or cash book balance.
Following are the main points of difference between cash book and pass book. You need some fundamental knowledge of two items, passbook, and cash book also called the bank book, in order to know what the bank reconciliation statement is. In order to prepare a bank reconciliation statement we need to have a bank balance. When cheques are received from the debtors, they are immediately recorded on the debit side of the cash book and the balance of the cash book increase, however the bank takes some time say a few days to actually realise the amount which cause a difference between the cash book and the pass. It would, for example, list outstanding cheques ie. Reconciliation of the bank statement and cash book of business balances the amounts as an explanation for the differences between the two. A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. A passbook or bankbook is a paper book used to record bank, or building society transactions on a deposit account. When the cheque is issued, the cashieraccountant of the business enterprise records this transaction on the credit side of the cash book under the bank column immediately.
If something is missing we can take in bank reconciliation statement, similarly any extra entri. Aug 17, 2017 contents1 ncert solutions for class 11 financial accounting bank reconciliation statement1. Preparing a bank reconciliation statement difference. What is reconciling the bank account balances as per cash book and pass book. Hence, there is a time gap between the entry made in the cash book and the one made in the bank pass book. The bank reconciliation statement is prepared that helps to reconcile the. Bank reconciliation cash book serves the purpose of cash account and bank account of the firm. In bookkeeping, a bank reconciliation is a process that explains the difference on a specified date between the bank balance shown in an organizations bank statement, as. Oct 29, 2019 cheques deposited entered in the cash book, but forget to sent the bank. We would need both cash books and passbook that a bank issues, to compare the entries and record differences. Briefly explain the statement wrongly debited by the bank with the help of.