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 bank column of the cash book and the balance as per the bank passbook/statement on a particular date.
What is the accounting entry when a bank directly pays a creditor through standing instruction?
Debit creditor account, credit bank account in cash book.
Why does a difference arise between the cash book balance and the passbook balance?
Differences arise due to timing differences such as unpresented cheques, uncredited cheques, bank charges not recorded in the cash book, or errors made by either the firm or the bank.
Which items are added to the cash book balance when preparing BRS from the cash book side?
Cheques issued but not presented, direct credits by bank.
What are 'unpresented cheques' in the context of BRS?
Unpresented cheques are cheques issued by the account holder and recorded in the cash book but not yet presented to the bank for payment, causing the cash book balance to be lower than the passbook balance.
What is meant by 'time lag' in the context of bank reconciliation?
Delay between recording a transaction in cash book and bank's books.
What are 'uncredited cheques' (deposits in transit)?
Uncredited cheques are cheques deposited by the account holder and recorded in the cash book but not yet credited by the bank in the passbook, causing the cash book balance to be higher than the passbook balance.
How does a dishonoured bill of exchange receivable affect the bank reconciliation statement?
It reduces the bank balance; cash book must be credited.
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