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Questions and Answers
What is the primary purpose of a Bank Reconciliation Statement (BRS)?
What is the primary purpose of a Bank Reconciliation Statement (BRS)?
- To identify errors in the passbook.
- To prepare the passbook.
- To reconcile differences between the bank balance as per the cash book and the bank statement. (correct)
- To prepare the cash book.
A bank reconciliation statement is prepared to identify fraud within a company.
A bank reconciliation statement is prepared to identify fraud within a company.
False (B)
Name two items that may appear in the cash book but not yet in the passbook.
Name two items that may appear in the cash book but not yet in the passbook.
Cheques issued but not yet presented, cheques deposited but not yet credited
If the balance as per the cash book is $50,000 and there are unpresented cheques of $5,000, the adjusted cash book balance will be $____.
If the balance as per the cash book is $50,000 and there are unpresented cheques of $5,000, the adjusted cash book balance will be $____.
Match the items with their effect on the bank reconciliation when starting with the cash book balance:
Match the items with their effect on the bank reconciliation when starting with the cash book balance:
What is the impact of 'cheques issued but not presented for payment' on the bank reconciliation statement, if the starting point is the cash book balance?
What is the impact of 'cheques issued but not presented for payment' on the bank reconciliation statement, if the starting point is the cash book balance?
Direct deposits into the bank account by a customer, which are unknown to the company until receipt of the bank statement, would require an adjustment to the passbook balance in the bank reconciliation statement.
Direct deposits into the bank account by a customer, which are unknown to the company until receipt of the bank statement, would require an adjustment to the passbook balance in the bank reconciliation statement.
If a company's cash book shows a balance of $10,000 but the bank statement shows $9,000, and the difference is due to outstanding cheques, what is the value of the outstanding cheques?
If a company's cash book shows a balance of $10,000 but the bank statement shows $9,000, and the difference is due to outstanding cheques, what is the value of the outstanding cheques?
An error in the cash book where a payment of $250 was recorded as $200 requires a(n) ______ of $50 to the cash book balance.
An error in the cash book where a payment of $250 was recorded as $200 requires a(n) ______ of $50 to the cash book balance.
Match the following terms with their respective meanings in the context of bank reconciliation:
Match the following terms with their respective meanings in the context of bank reconciliation:
Which of the following items would require an adjustment to the passbook balance in a bank reconciliation?
Which of the following items would require an adjustment to the passbook balance in a bank reconciliation?
A NSF (non-sufficient funds) check returned by the bank requires an adjustment as part of the bank reconciliation process.
A NSF (non-sufficient funds) check returned by the bank requires an adjustment as part of the bank reconciliation process.
What is the purpose of adjusting errors found during bank reconciliation?
What is the purpose of adjusting errors found during bank reconciliation?
If the balance as per the passbook is $20,000 and there is a direct deposit of $2,000 not yet recorded in the cash book, the adjusted cash book balance should be $____.
If the balance as per the passbook is $20,000 and there is a direct deposit of $2,000 not yet recorded in the cash book, the adjusted cash book balance should be $____.
Match the following scenarios with the correct approach in the bank reconciliation process:
Match the following scenarios with the correct approach in the bank reconciliation process:
Which of the following describes 'standing instructions' in the context of bank reconciliation?
Which of the following describes 'standing instructions' in the context of bank reconciliation?
When 'preparing a bank reconciliation, it is not necessary to investigate small discrepancies if they are considered immaterial.
When 'preparing a bank reconciliation, it is not necessary to investigate small discrepancies if they are considered immaterial.
Explain why knowledge of the amount in transit is important when reconciling bank statements.
Explain why knowledge of the amount in transit is important when reconciling bank statements.
If a cheque of $500 was wrongly debited by the bank, it should be ______ to the balance as per the passbook in the bank reconciliation statement.
If a cheque of $500 was wrongly debited by the bank, it should be ______ to the balance as per the passbook in the bank reconciliation statement.
Match each transaction with how it should be handled in a bank reconciliation starting with the Cash Book balance:
Match each transaction with how it should be handled in a bank reconciliation starting with the Cash Book balance:
Which of the following items would be subtracted from the bank balance side of a bank reconciliation?
Which of the following items would be subtracted from the bank balance side of a bank reconciliation?
When preparing a bank reconciliation, all entries in the cash book must match the entries on the bank statement.
When preparing a bank reconciliation, all entries in the cash book must match the entries on the bank statement.
How will a cheque issued to a supplier but uncashed by the supplier affect Bank Reconciliation?
How will a cheque issued to a supplier but uncashed by the supplier affect Bank Reconciliation?
A bill discounted dishonored not recorded in the cash book, this error is ______ from Bank Reconciliation Statement for reconciling the bank book
A bill discounted dishonored not recorded in the cash book, this error is ______ from Bank Reconciliation Statement for reconciling the bank book
Match the debit/credit differences between business and bank.
Match the debit/credit differences between business and bank.
If the balance as per the pass book is the starting point, which of the following should be added?
If the balance as per the pass book is the starting point, which of the following should be added?
Bank overdraft should be treated like bank.
Bank overdraft should be treated like bank.
When should each correction should be made?
When should each correction should be made?
The most popular way for correcting errors is ______.
The most popular way for correcting errors is ______.
Match Only/Moving Items method with correct base document.
Match Only/Moving Items method with correct base document.
If Cheque deposited in the bank but no entry was passed in the Cash Book: how should it be handled in bank reconciliation?
If Cheque deposited in the bank but no entry was passed in the Cash Book: how should it be handled in bank reconciliation?
Cheque must be cleared before bank reconciliation.
Cheque must be cleared before bank reconciliation.
Credit side of the Cash book bank column cast short, the value should be?
Credit side of the Cash book bank column cast short, the value should be?
Bank charges must be ______ from cash Book.
Bank charges must be ______ from cash Book.
Match the process when Credit sides of cash book is short.
Match the process when Credit sides of cash book is short.
A Cheque received entered twice in the cash book what to do?
A Cheque received entered twice in the cash book what to do?
Discount on Bill should always be recorded.
Discount on Bill should always be recorded.
Why did bank deduct money for Bills dishonored in the bank Account statement?
Why did bank deduct money for Bills dishonored in the bank Account statement?
Deduct Outstanding payments when we overdraft from ______
Deduct Outstanding payments when we overdraft from ______
Match Overdraft and Base Documents.
Match Overdraft and Base Documents.
Flashcards
Bank Reconciliation Statement (BRS)
Bank Reconciliation Statement (BRS)
A statement prepared to reconcile differences between bank balance as per cash book and passbook.
Items in cash book, not in pass book
Items in cash book, not in pass book
Items recorded in the company's books (cash book) but not yet by the bank.
Items in pass book, not in cash book
Items in pass book, not in cash book
Items recorded by the bank (pass book) but not yet by the company.
Differences between cash book and pass book
Differences between cash book and pass book
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Issued but not debited cheques
Issued but not debited cheques
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Deposited but not credited cheques
Deposited but not credited cheques
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Errors in bank reconciliation
Errors in bank reconciliation
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Standing Instructions
Standing Instructions
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Bank interest/charges
Bank interest/charges
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Direct deposit
Direct deposit
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Bills for collection
Bills for collection
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Balance as per Cash Book
Balance as per Cash Book
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Balance as per Pass Book
Balance as per Pass Book
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Matching Technique
Matching Technique
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Under Casting: Receipts
Under Casting: Receipts
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Under Casting: Payments
Under Casting: Payments
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Over Casting: Receipts
Over Casting: Receipts
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Over Casting: Payments
Over Casting: Payments
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Bill of exchange
Bill of exchange
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Due date
Due date
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Study Notes
Bank Reconciliation Statement (BRS)
- BRS reconciles the differences between bank balance as per cash book and bank balance as per passbook
- Balance as per cash book = 100,000
- Balance as per pass book = 80,000
POV Table
- POV = Point of View
- Business POV: Bank is a liability, Debit increase and credit decrease
- Bank POV: Business is an asset, Debit decrease and credit increase
Reasons for Differences Between Cash Book and Pass Book
- Items appear in the cash book but not in the pass book:
- Cheques issued by the business not yet debited by the bank
- Cheques deposited but not credited
- Errors
- Standing instructions
- Items appear in the pass book but not in the cash book:
- Bank interest, bank charges
- Direct deposits
- Bills for collection
BRS Language
- Receipt/Deposit: Cash or cheque deposited into a bank account
- Payment/Issued: Cash or cheque issued from a bank account
BRS Example Layout
- BRS of KAR co. from 31-Dec-2020, lists balance as per cash book
- Items to add are listed
- Listed here are items to deduct
- Ends with the Balance as per Passbook
BRS Types/Cases
- Balance as per Cash Book (+) is equal to Overdraft as per Pass Book (-)
- Balance as per Pass Book (+) is equal to Overdraft as per Cash book (-)
BRS Techniques
- Scenarios to cover:
- Balance as per Cash Book/Overdraft as per Pass Book
- Balance as per Pass Book/Overdraft as per Cash Book
- Identify the transaction as either a receipt or a payment.
- Recording:
- Record a tick in C.B when recording.
- Record a cross in P.B when recording.
- Focus only only Cash Book or Pass Book to manipulate amounts
- If the balance is as per Cash Book or Overdraft as per Pass Book, only move Cash Book.
- If the balance as per Pass Book/Overdraft as per CB, only move Pass Book.
BRS Example 1
- Cash Book balance is $20,000
- Discrepancies found when comparing with the pass book are:
- Cheque issued but not yet presented: $8,000
- Cheque deposited but not collected: $9,000
- Bank paid insurance premium: $5,000
- Bank charges: $600
- Direct deposit by a customer: $8,000
- Interest on investments collected by the bank: $4,000
- Example to prepare BRS as on 31st December 2020.
Example 1 Solution
- Cheque issued but not yet presented for payment:
- A cheque is issued.
- Supplier didnt go to the bank.
- Cheque deposited but not collected/cleared/credited:
- Cheque deposited to the bank
- Cheque not yet cleared
- Standing instruction or direct payments:
- Payment made to 3rd party automatically.
- Bank charges, interest charges:
- Business getting charges and statements from bank.
- Direct deposited into bank A/C:
- Customer making direct deposit to business A/C.
- Interest & dividend collected by bank:
- Bank interest, preference shares coming from bank.
- Example Solution:
- Example of Bank Reconciliation Statement as on 31st Dec, 2020 lists
- Balance as per Cash Book
- Add: Cheque issued but not yet presented for payment, Direct deposit by a customer, Interest on the investment collected by a bank
- Less: Cheque deposited in the bank but not collected, Bank paid insurance premium, and Bank Charges.
- Finally lists the Balance as per Pass book
BRS Example 2
- Balance as per pass book: $15,000
- Cheque deposited into the bank, but no entry was passed in the Cash Book: $1,000
- Cheque received and entered in the Cash book but not sent to the Bank: $3,000
- Credit side of the Cash book bank column cast short: $500
- Insurance premium paid directly by the bank: $1,000
- Bank charges entered twice in the CB: $100
- Cheque issued but not presented to the bank for payment: $800
- Cheque received entered twice in the CB: $1,500
- Bill discounted dishonored not recorded in the cash book: $8,000
- Example to prepare BRS as on 30th June, 2019.
Example 2 Solution
- Cheque deposited into bank but not entry in cash book:
- Business receiving money making deposit.
- Cheque received or entered in the cash book but not sent to bank:
- Received money from Customer
- Not sent to the bank
- Under casting & over casting
- CB = 1,000 , Spent 750, Recorded 250, Avl. Bal. = 750
- PB = 1,000 , Spent 750, Recorded 750, Avl. Bal. = 250
- Credit side of cash book column cast short:
- CB with Payment less
- Standing instruction or direct payments:
- Payment made to 3rd party automatically.
- Bank charges entered twice in the cash book:
- Recording bank charges twice.
- Cheque issued but not yet presented for payment:
- A cheque is issued.
- Supplier didnt go to the bank.
- Cheque received entered twice in the cash book:
- Recording cheque twice.
- Dishonored Of Bill Not Recorded In Cash Book:
- Bank Reconciliation Statement as on 30th June, 2019
- Includes Balance as per Pass book
- Add: Cheque received and entered in the CB but not sent to Bank, Credit side of the Cash book bank column cast short, Insurance premium paid directly by the bank, Cheque received entered twice in the CB, Bill discounted dishonored not recorded in the cash book
- Less: Cheque deposited into the bank, but no entry was passed in the Cash Book, Bank charges entered twice in the CB, Cheque issued but not presented to the bank for payment
- Balance as per Cash Book =
Additional Examples
- Bank Overdraft as per Passbook: $16,500
- Cheque issued but not presented for payment: $8,750
- Cheque deposited in the bank but not collected: $10,500
- Dividend collected by bank $4,000 but recorded in cashbook as $6,000
- Direct deposit into bank by customer: $3,500
- Bank charges: $200
- Premium of life insurance policy paid by the bank on standing instruction: $1,980
- Bank charges entered twice by bank: $150
- Cheque deposited and collected: $1,000
- Prepare BRS as on 30th June, 2019.
- Solutions:
- Cheque issued but not yet presented for payment:
- A cheque is issued.
- Supplier didnt go to the bank.
- Cheque deposited into bank but not collected/cleared/credited:
- Cheque deposited to the bank
- Cheque not yet cleared
- Dividend collected by bank $4,000 but recorded in cashbook $6,000:
- Difference between A/C recording.
- Direct deposited into bank by Customer:
- Customer making direct deposit to business A/C.
- Bank charges, interest charges:
- Business getting charges and statements from bank.
- Standing instruction or direct payments:
- Payment made to 3rd party automatically.
- Bank charges entered twice by bank:
- Recording bank charges twice.
- Example of Bank Reconciliation Statement as on 30th June, 2019 lists
- Overdraft as per Passbook
- Add: Cheque issued but not presented for payment, Direct deposit into bank by customer
- Less: Cheque deposited in the bank but not collected, Dividend collected by bank $4,000 but recorded in cashbook as, Bank charges, Premium of life insurance policy paid by the bank on standing instruction, Bank charges entered twice by bank
- Overdraft as per Cash Book
Final Problems
-
Bank Overdraft as Cashbook: $6,340
-
Interest on overdraft is entered: $160
-
Bank charges: $30
-
Cheque issued bun not cashed: $1,168
-
Cheque paid into bank but not cleared: $2,170
-
Interest on investment collected by bank: $1,200
-
Solutions for final solutions:
- Interest on Overdraft is entered:
- Business getting charges and statements from bank.
- Bank charges:
- Business getting charges and statements from bank.
- Cheque issued but not yet presented for payment:
- A cheque is issued.
- Supplier didnt go to the bank.
- Cheque Paid into bank but not collected/cleared/credited:
- Cheque deposited to the bank
- Cheque not yet cleared
- Interest & dividends collected by Bank:
- Bank interest, preference shares coming from bank.
- BRS Solution Example:
- Includes Bank Reconciliation Statement
- Includes Overdraft as per Cashbook
- Add: Interest on overdraft is entered, Bank charges
- Less: Cheque issued bun not cashed, Cheque paid into bank but not cleared, Interest on the investment collected by bank
- Interest on Overdraft is entered:
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