Preparation of Bank Reconciliation Statement: Methods & Practical Examples
1. Golden Rules for Preparing a BRS
When solving Bank Reconciliation Statement problems, remember the single most important rule:
The Driving Rule of BRS: Always adapt your starting balance to match the target balance!
- If you start with Cash Book Balance → Your target is Passbook! If Passbook is higher, ADD (+). If Passbook is lower, SUBTRACT (-).
- If you start with Passbook Balance → Your target is Cash Book! If Cash Book is higher, ADD (+). If Cash Book is lower, SUBTRACT (-).
2. The Plus and Minus (+ / -) Column Format
The most popular, modern, and error-free format recommended for university examinations is the Plus and Minus Method:
Bank Reconciliation Statement as on [Date]
| Particulars | Plus Amount (₹) | Minus Amount (₹) |
|---|---|---|
| Balance as per Cash Book / Passbook | [Amount] | |
| 1. Cheques issued but not presented for payment | + | |
| 2. Cheques paid into bank but not yet credited | - | |
| 3. Direct deposit by a customer into the bank | + | |
| 4. Bank charges debited by the bank | - | |
| 5. Interest credited by the bank | + | |
| 6. Insurance premium paid directly by bank (standing order) | - | |
| 7. Cheque dishonoured and debited by bank | - | |
| Balance as per Target Book (Difference) | [Balancing Fig] | |
| TOTAL | Equal Total | Equal Total |
3. Four Starting Points in BRS Problems
Depending on the problem given in the exam, there are four possible starting points:
4 Starting Points in BRS
|
+---------------------------+---------------------------+
| |
Favorable Balance Overdraft (Unfavorable)
- Debit balance as per Cash Book - Credit balance as per Cash Book
- Credit balance as per Passbook - Debit balance as per Passbook4. Master Adjustment Logic Guide (Starting with Cash Book Favorable Balance)
When you begin with a Debit (Favorable) Balance as per Cash Book:
| Transaction / Event | Why Passbook Differs | What to Do in BRS |
|---|---|---|
| 1. Cheques issued but not yet presented for payment | Cash book reduced balance; Bank has not yet deducted money, so Passbook balance is HIGHER. | ADD (+) |
| 2. Cheques deposited into bank but not yet collected/credited | Cash book added balance; Bank has not yet credited money, so Passbook balance is LOWER. | SUBTRACT (-) |
| 3. Direct payments into bank by customers | Bank received cash and credited passbook; Cash book does not know, so Passbook is HIGHER. | ADD (+) |
| 4. Interest or dividend collected directly by bank | Bank credited money to passbook, so Passbook is HIGHER. | ADD (+) |
| 5. Bank charges, interest on overdraft, or commission debited by bank | Bank deducted charges from passbook, so Passbook is LOWER. | SUBTRACT (-) |
| 6. Direct payments made by bank under standing instructions | Bank paid insurance/rent and debited passbook, so Passbook is LOWER. | SUBTRACT (-) |
| 7. Customer’s deposited cheque bounced (dishonoured) | Cash book recorded as deposit; Bank did not credit or reversed it, so Passbook is LOWER. | SUBTRACT (-) |
| 8. Under-casting (under-adding) of Cash Book receipt side | Cash book added less, so Passbook is HIGHER. | ADD (+) |
5. Solved Comprehensive Case Study 1: Starting with Favorable Cash Book
Problem: On 31st March 2026, the Cash Book of M/s Malwa Traders showed a debit bank balance of ₹65,000. On comparing it with the Bank Passbook, the following discrepancies were discovered:
- Cheques issued to suppliers amounting to ₹18,000 during March were not presented for payment until 4th April 2026.
- Cheques amounting to ₹14,000 deposited into the bank on 28th March were credited by the bank only on 5th April 2026.
- A customer, Mr. Verma, deposited ₹8,500 directly into the bank account, but no entry was made in the Cash Book.
- Bank charges amounting to ₹450 were debited in the Passbook, but not entered in the Cash Book.
- Dividend of ₹2,200 collected directly by the bank appeared in the Passbook only.
- A standing instruction for insurance premium of ₹3,000 was paid by the bank, not yet recorded in the Cash Book.
- A cheque of ₹4,500 received from a debtor and deposited into the bank was dishonoured, but notice of dishonour was received on 2nd April.
Prepare the Bank Reconciliation Statement as on 31st March, 2026.
Solution:
M/s Malwa Traders — Bank Reconciliation Statement as on 31st March, 2026
| Particulars | Plus Amount (₹) | Minus Amount (₹) |
|---|---|---|
| Debit Balance as per Cash Book | 65,000 | |
| Add: Cheques issued but not presented for payment | 18,000 | |
| Less: Cheques deposited into bank but not yet cleared/credited | 14,000 | |
| Add: Direct deposit by customer Mr. Verma into bank | 8,500 | |
| Less: Bank charges debited by bank | 450 | |
| Add: Dividend collected directly by bank | 2,200 | |
| Less: Insurance premium paid directly by bank under standing order | 3,000 | |
| Less: Cheque dishonoured, debited by bank | 4,500 | |
| Sub-Total | 93,700 | 21,950 |
| Credit Balance as per Passbook (Favorable) (₹93,700 - ₹21,950) | 71,750 | |
| TOTAL | ₹93,700 | ₹93,700 |
Verified Closing Balance as per Bank Passbook = ₹71,750 (Credit - Favorable)
6. Solved Comprehensive Case Study 2: Bank Overdraft (Unfavorable Balance)
When the business has taken an Overdraft facility from the bank, it owes money to the bank:
- An overdraft as per Cash Book is a Credit Balance (entered in the Minus column).
- An overdraft as per Passbook is a Debit Balance.
Problem: On 30th September 2026, the Cash Book of Agarwal Enterprises showed a Bank Overdraft of ₹24,000. Discrepancies were:
- Cheques issued but not encashed before 30th September: ₹7,000.
- Cheques paid into bank but not yet credited: ₹9,000.
- Bank charges of ₹300 and Overdraft Interest of ₹1,200 were debited by the bank, but not recorded in the Cash Book.
- Direct collection of interest on investments by bank: ₹1,500.
Solution:
Agarwal Enterprises — Bank Reconciliation Statement as on 30th September, 2026
| Particulars | Plus Amount (₹) | Minus Amount (₹) |
|---|---|---|
| Overdraft (Credit balance) as per Cash Book | 24,000 | |
| Add: Cheques issued but not presented (reduces overdraft!) | 7,000 | |
| Less: Cheques deposited but not credited | 9,000 | |
| Less: Bank charges and Overdraft Interest debited by bank (₹300 + ₹1,200) | 1,500 | |
| Add: Interest on investment collected directly by bank | 1,500 | |
| Sub-Total | 8,500 | 34,500 |
| Overdraft (Debit balance) as per Passbook (₹34,500 - ₹8,500) | 26,000 | |
| TOTAL | ₹34,500 | ₹34,500 |
Closing Bank Overdraft as per Passbook = ₹26,000 (Debit - Overdraft)
7. Summary & Quick Revision Checklist
- Target book principle: If starting with Cash Book, ask: “Is the Passbook higher or lower?”
- Add to Cash Book: Cheques issued not presented, Direct customer deposits, Direct interest/dividends collected by bank.
- Deduct from Cash Book: Cheques deposited not cleared, Bank charges, Standing instruction payments, Dishonoured cheques.
- Overdraft is an unfavorable debt balance; Cash book overdraft is Credit; Passbook overdraft is Debit.
- Plus and Minus method provides a clear, fail-proof format for university exams.