4 A AFME Bank Reconciliation Statement
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What is a Bank Reconciliation Statement (BRS)?
A BRS is a statement prepared to reconcile the difference between the balance as per the cash book maintained by the entity and the balance as per the bank passbook or bank statement on a particular date.
What is the accounting principle underlying the preparation of a BRS?
It reconciles two independent records of the same bank transactions.
Why does a difference arise between the cash book balance and the passbook balance?
Differences arise due to timing differences such as cheques issued but not yet presented for payment, cheques deposited but not yet collected, bank charges debited by the bank but not yet recorded in the cash book, and interest credited by the bank but not yet entered in the cash book.
Which balance is generally taken as the starting point in a standard BRS format?
Either the cash book balance or the passbook balance.
What are 'unpresented cheques' in the context of BRS?
Unpresented cheques (also called outstanding cheques) are cheques that have been issued and recorded in the cash book as payments but have not yet been presented to the bank for payment, causing the passbook balance to be higher than the cash book balance.
What happens to the cash book balance when a cheque issued remains unpresented?
Cash book balance is lower than passbook balance by that amount.
What are 'uncredited cheques' or 'cheques sent for collection but not yet collected'?
These are cheques deposited by the account holder and recorded as receipts in the cash book, but the bank has not yet credited the proceeds into the account, causing the cash book balance to be higher than the passbook balance.
What happens to the cash book balance when a cheque deposited is not yet collected?
Cash book balance is higher than passbook balance by that amount.
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