(BRS)

WHAT IS BRS?

“an aid to ensure the accuracy of transaction appearing in the bank columns of the Cashbook.”

Transactions are verified through an external record, namely, the bank statement.

REQUIREMENTS FOR BRS?

1) BANK COLUMN OF CASH BOOKEvery transaction relating to bank are recorded in our books of account under “Bank Column” of CASHBOOK. The debit balance of this is account is shown as “Cash at bank” in Balance Sheet on Assets Side.

2) BANK STATEMENT or PASSBOOKEvery account holder gets periodic statement from bank. It shows the summary of all the transactions relating to that particular account.

REASONS FOR DIFFERENCE1. Cheques issued not yet presented for

paymentWhenever a cheque is issued for payment, it is immediately

entered into the cash book. But the entry will be made by the bank into the passbook only when the cheque is presented for payment. Thus there will be a gap of a few days between both the entries.

For example: X issued a cheque of Rs. 2000 on 27 Mar, 2002 which is

presented in the bank on 2 Apr, 2002. The entry is recorded in cashbook on 27 Mar, 2002 but the bank will record it on 2 Apr, 2002. So on 31 Mar, 2002,

Balance as per Cash Book < Balance as per Passbook

For this, the following would be the entry in the Bank reconciliation statement:

• If the starting point is the pass book, then: Less: Cheques issued but not presented (2000)

• If the starting point is taken as the Cash book, then:Add: Cheques issued but not presented 2000

2. Cheques deposited into the bank but not yet clearedWhen the cheques are deposited into the bank, an entry is made in the Debit Side of the Cash book but usually banks credit the customer’s account only when the cheques have been cleared. Again, there will be some gap between the depositing of the cheques and Credit given by the bank.

For example: X deposited a cheque of Rs. 1000 into the bank on March 30, 2001 which is collected by the bank on April 4, 2001. When the Cass book is made on March 31, 2001, the cash book will be higher by Rs. 1000.

Balance as per Cash Book > Balance as per Passbook

Entry in the Bank Reconciliation Statement would be as follows:

•For pass book as starting point, add the amount to the balance as per Pass book:Add: Cheques paid but not cleared 1000

•For Cash book as starting point, less the amount from the balance as per cash book:Less: Cheques paid but not cleared 1000

3. Deposits made by the customers directly into the enterprise bank account

If a debtor deposits the amount directly into the bank account of the business, the balance in passbook increases without the corresponding increase in the Cash book.

Balance as per Cash Book < Balance as per Passbook

For example: A debtor deposited Rs 1000 in our bank account directly, then the entry in BRS would be:

• Balance as per passbook is taken as starting point, then:

Less: Deposits directly made into the bank account(1000)

• Balance as per cashbook is taken as starting point, then:

Add: Deposits directly made into the bank account1000

4. Bank Charges

The interest charged or any other bank charges are debited in the customer’s account directly. The customer makes the entry in his cash book after seeing the pass book.

For example: Bank charges of Rs. 300 are debited in the Pass Book.

Entry in the Bank Reconciliation Statement:•Balance as per passbook is starting point, then:Add: Bank charges debited to the passbook, not yet recorded

300

5. Wrong Entries

It may be possible that while recording the transactions in the cash book, a cheque of Rs. 1000 deposited is recorded as Rs. 10000. Similarly the bank may also commit mistake while recording the transactions in the pass book.

For example: The bank erroneously debited customer’s account for a cheque of Rs. 800The entry in the BRS would be:Balance as per passbook is starting point, then:Add: A wrong debit in the Pass Book 800

6. Interest allowed by the BankIf the bank has allowed interest to the customer, it will first be shown in the Pass Book. And later in the Cash book since the customer comes to know of the interest by perusing the pass book and then makes appropriate entry in the Cash book.

For example: Bank credited the interest of Rs 1000 into the Mr. X A/C on 31 March,2009. Mr. X will come to know about this interest entry when he gets his bank statement, lets say on 2 Apr,2009. So on 31 March,2009

Balance as per Cash Book < Balance as per Passbook

Entry in Bank Reconciliation Statement will be as follows:

•Balance as per passbook is starting point, then:Less: Interest credited to bank account, not yet recorded

(1000)

•Balance as per cashbook is starting point, then:Add: Interest credited to bank account, not yet recorded

1000

7. Dishonor of cheque deposited in the bank account:

When a cheque deposited into the bank account gets dishonored, bank doesnot credit the bank account of business. While it gets recorded in cash book at the time of its deposit into the bank.

For example: A cheque of Rs 1000 deposited on 29 Mar, 2009 gets dishonored, and same is reported to the business on 1 Apr, 2009.

Balance as per Cashbook > Balance as per Passbook

Entry in BRS:

• Balance as per passbook is starting point, then:

Add: Cheque dishonored 1000

• Balance as per Cashbook is starting point, then:

Less: Cheque dishonored (1000)

PREPARATION OF BRS

1. Take the cashbook or passbook balance as starting point.

2. Tick off the entries shown in both, Cashbook and Passbook. No adjustments needs to be made for them.

3. Make necessary adjustment for entries omitted in one of the books, or both books.

4. Finally reaching the balance as per the other book

FORMAT OF BRS

ITEM Rs. Rs.

Bank Balance as per cashbook/passbook xxx

Add:

1. xxx

2. xxx

3. xxx

xxx

Less:

1. xxx

2. xxx

3. xxx

xxx

Balance as per other book xxx

BANK RECONCILIATION STATEMENT AS ON ………….

ILLUSTRATION

Balance of Cash at Bank on 31 Mar 2009 – Rs 50,000Balance of bank account as per passbook – Rs

53,200On inspection it was founded that:1) Cheques issued to Y on 28 Mar 2009 for Rs 7000,

was presented for payment on 15 Apr, 20092) Cheques received from X on 31 Mar 2009 for Rs

3000, was deposited on 2 Apr 20093) Interest credited by bank on 31 Mar 2009 – Rs

1200. No entry was passed in the Cashbook.4) Cheques amounting to Rs 2000, deposited on 25

March 2009, were dishonored. No entry has been made for it in the Cashbook yet.

SOLUTION

ITEM Rs. Rs.

Bank Balance as per CASHBOOK 50,000

Add:

1. Interest credited by bank, not recorded

1200

2. Cheque issued to Y, not yet presented 7000

58,200

Less:

1. Cheque received from X, not yet deposited

(3000)

2. Cheque dishonored (2000)

53,200

Balance as per PASSBOOK 53,200

BANK RECONCILIATION STATEMENT AS ON MARCH 31, 2009

ADVANTAGES OF BRS

ERROR DETECTION DELAY IN COLLECTION REVEALED COMPLETION OF CASHBOOK CHANCES OF EMBEZZLEMENTS ARE

REDUCED