Here we detail about the eleven major causes of difference between cash balances of bank and cash book. The double column cash book also known as two column cash book has two money columns on both debit and credit sides one to record cash transactions and one to record bank transactions. The statement is known as the bank reconciliation statement. It would, for example, list outstanding cheques ie. Cheques recorded in cash book but not yet credited by bank. All transactions related to bank are recorded in the bank column of the cash book and these transactions are also recorded in the pass book by the bank. Sep 19, 2018 bank reconciliation statement in short brs, is an explanation of the difference between bank balance as per cash book and bank balance as per passbook bank statement. Explain the meaning of cash book, pass book, and petty cash book. Cash book is written by depositor and pass book is written by the bank. If one looks at the debit side of the cash book and the deposits column of the pass book, and checks item by item, one will find that the following cheques deposited with the bank. So, if the bank columns of the cash book show a debit balance as on a specified date, the bank statement should show an equal. Patel id 20 flow of presentation introduction objectives cash book types of cash book simple cash book two column cash book three column cash book petty cash book pass book bank reconciliation statement meaning causes for difference between cash. The differences between the cash book and the bank passbook is caused by.
Cash book is prepared by the firms whereas passbook is written by banks and retained by the customer. Preparing the bank reconciliation statement 2 methods. This article explains the difference between cash book and pass book. Cheques deposited entered in the cash book, but forget to sent the bank. Now as you are studying accountancy instead of a, b, c, let me assume that you are grown enough to know what a passbook is. As we all engage in more automatic and electronic transactions, this is a critically important step to ensure that the cash balance is correct. Sometimes the bank balances as per cash book and bank statement. I preparation of bank reconciliation statement without.
In bookkeeping, a bank reconciliation is a process that explains the difference on a specified date between the bank balance shown in an organizations bank statement, as. Bank reconciliation statement in short brs, is an explanation of the difference between bank balance as per cash book and bank balance as per passbook bank statement. We have to check all the transaction recorded in the cash book with transactions recorded in passbook by our bank. Distinguish between bank pass book and bank statement. Sep 19, 2018 the bank reconciliation statement is the process of checking the differences between a bank column of the cash book and the bank statement or passbook. Traditionally, a passbook is used for accounts with a low transaction volume, such as a savings account. When cheques are received from the debtors, they are immediately recorded on the debit side of the cash book and the balance of the cash book increase, however the bank takes some time say a few days to actually realise the amount which cause a difference between the cash book and the pass. What are the causes of disagreement between cash book and pass book. Now we shall move to study the steps taken in preparation of bank reconciliation statement in each of the above cases.
A passbook or bankbook is a paper book used to record bank, or building society transactions on a deposit account. Sep 11, 20 objectives explain the meaning of cash book, pass book, and petty cash book. Reconciliation of the cash book and the bank passbook balances amounts to an explanation of differences between them. Why is a bank reconciliation statement is prepared answers. Interest on deposit allowed by the bank entered in the passbook but not in cash book. Briefly explain the statement wrongly debited by the bank with the help of. Explain the advantages of bank reconciliation statement. Bank reconciliation statement is a statement prepared to reconcile the balances of cash book maintained by the concern and pass book maintained by the bank at periodical intervals. What is the need for a bank reconciliation statement. If the balance of the cash book is taken as a starting point then cash book balance is to be adjusted in accordance with the entries passed in the bank pass book and vice versa. Prepare bank reconciliation statement on dated december 31, 2014. Mp board class 11th accountancy important questions. Cash book refers to the book maintained by the customer at his end wherein the entries affecting the bank balance are recorded immediately irrespective of the fact as regards realisation of the cheque or debit of the cheques issued by him.
The need to prepare a brs arises due to the following reasons. Give reasons for differences between the cash book and pass book balances. At the end of every month entries in the cash book are compared with the entries in the pass book. Bank reconciliation statement 153 reconciliation of the cash book and the bank passbook balances amounts to an explanation of differences between them.
Nov 20, 2018 reconciliation is a fundamental account process that ensures the actual money spent matches the money leaving an account at the end of a fiscal period. It is not a part of accounts or double entry system. Preparing a bank reconciliation financial accounting. The aim is to make sure all transactions are accounted. If the balance is taken as per the cash book then the following items will be added. Oct 29, 2019 cheques deposited entered in the cash book, but forget to sent the bank. A statement prepared to reconcile the bankbalance as per cash book with the balance as per passbook or bank statement,by showing the items of difference between the two accounts. You need some fundamental knowledge of two items, passbook, and cash book also called the bank book, in order to know what the bank reconciliation statement is. One copy of this statement is also sent to the bank if the bank has made some errors or mistakes in the pass book. If one looks at the debit side of the cash book and the deposits column of the pass book, and checks item by item, one. Bank reconciliation statement brs is prepared as and when needed. Discuss the causes for difference between the balances of pass book and cash book.
Normally a firm make payments through bank, it means a cheque or a demand draf. Bank reconciliation statement is prepared either by starting with the bank pass book balance or cash book balance. One copy of this statement is also sent to the bank if the. The cash book shows a balance of rs 33,000, whereas the pass book shows a balance of rs 39,930. The post office savings bank introduced passbooks to rural 19th century britain. We need to do a bank reconciliation to find out why there is a difference. What is reconciling the bank account balances as per cash book and pass book. Entries are recorded just like a ledger account with the help of. Jan 16, 2019 bank reconciliation cheat sheet join me in this episode of accounting basics for beginners as i show you how to do a bank reconciliation from scratch.
Aug 17, 2017 contents1 ncert solutions for class 11 financial accounting bank reconciliation statement1. Bank reconciliation is prepared to know differences between bank book and passbook, when we do the bank reconsilation will get mainly four differences 1. Bank reconciliation cash book serves the purpose of cash account and bank account of the firm. The objective of preparing a brs bank reconciliation statement is not to. A business firm periodically prepares a bank reconciliation statement to reconcile the bank balance as per the cash book with the passbook as these two show different balances for various reasons. Passbook is issued by the bank to the account holder that records the deposits and withdrawals. What is the difference between a cash book and a passbook. Discuss the causes for difference between the balances of pass book and cash.
Causes of differences between the cash book and the pass book are. A bank reconciliation compares the bank statement and our companys records and reconciles or balances to two account balances. A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. Bank reconciliation statement in short brs, is an explanation of the difference between bank balance as per cash book and bank balance as per passbookbank statement. All the cash transactions as well as bank transactions are recorded here. Cheques issued but not presented for payment will reduce the balance as per the passbook. A cash book is a type of subsidiary book where cash or bank receipts and cash or bank payments made during a period are recorded in a chronological order. Bank reconciliation statement financial accountingi. Jan 08, 2018 the paramount differences between cash book and pass book are explained in the given below points. Bank reconciliation cheat sheet join me in this episode of accounting basics for beginners as i show you how to do a bank reconciliation from scratch. When the cheque is issued, the cashieraccountant of the business enterprise records this transaction on the credit side of the cash book under the bank column immediately. Entries in the cash book are then posted into the general.
In order to prepare a bank reconciliation statement we need to have a bank balance. Preparing a bank reconciliation statement difference. A bank reconciliation statement is a statement prepared by the entity as part of the reconciliation process which sets out the entries which have caused the difference between the two balances. Reconciliation of the bank statement and cash book of business balances the amounts as an explanation for the differences between the two. The bank reconciliation statement is an additional statement that is prepared to serve some purpose, i. Double column cash book explanation, format, example. We would need both cash books and passbook that a bank issues, to compare the entries and record differences. A bank reconciliation is a statement prepared mainly to reconcile the differences shown between the bank column of the cash book and the pass book.
Financial accounting a presentation on cash book, pass book, bank reconciliation statement presented by. If something is missing we can take in bank reconciliation statement, similarly any extra entri. State the need for the preparation of bank reconciliation statement. Sometimes, the bank balance as per cash book and passbook does not tally with each other, then we can know the difference between them by preparing the bank reconciliation statement.
Distinction between cash book and pass book, accounting lecture. Following are the main points of difference between cash book and pass book. The need for preparation of brs arises only when there is a difference in the. The bank reconciliation statement is prepared that helps to reconcile the. Feb 28, 2019 bank reconciliation cash book serves the purpose of cash account and bank account of the firm. Bank reconciliation statement part1 class 11th accounts. The booktobank reconciliation status for that bank statement is changed to awaiting confirmation. Explain the meaning, need and importance of bank reconciliation statement. Bank balance as per cash book of a trader as on 31st dec. The need for preparation of brs arises only when there is a difference in the bank ac balance as revealed by the cash book and the bank balance as shown by the pass book issued by the bank. Main purpose of bank reconciliation statement is to match companies transactions with the bank.
Differences between cash balances of bank and cash book. This enables you to make any necessary changes to the data and click the recalculate link on the book to bank reconciliation page to run the book to bank reconciliation application engine program again. Subscribe to our youtube channel to watch more accounting lectures. Hence, there is a time gap between the entry made in the cash book and the one made in the bank pass book. Bank reconciliation interview questions and answers guide. Reconciliation is a fundamental account process that ensures the actual money spent matches the money leaving an account at the end of a fiscal period. What are some reasons that cause the balance on the bank. Explain the process of preparing bank reconciliation statement with amended cash balance. Bank reconciliation statement is generally prepared at the end of the month or the year and it is not necessary when there is no disagreement between the pass book balance and the cash book balance. Difference between a cash book balance and bank statement. There is a slight difference between cash book and passbook, that is. Receipts are recorded on the debit the left hand side, and payments are recorded on the credit right hand side. Need for reconciliation timing differences cheques issued by the bank but not yet presented for payment cheques paid into the bank not yet collected direct debits made by the bank on behalf of the.
A bank reconciliation statement is a statement prepared as part of the reconciliation which sets out the entries which have caused the difference between the two balances. Explain the reasons which cause pass book of the bank and your bank book not tally. The relationship between the customer and the banker is that of a creditor and a debtor. While preparing the bank reconciliation statement, the date of issue of cheque and presentation of the cheque to the bank for payment will vary. So, if the bank columns of the cash book show a debit balance as on a specified date, the bank statement should show an equal amount of credit balance as on that date and viceversa. The paramount differences between cash book and pass book are explained in the given below points. Both balances are equal but opposite generally these two balances do not agree. A bank reconciliation is a monthly process by which we match up the activity on the bank statement to ensure that everything has been recorded in the companys or individuals books. Causes of disagreement between cash book and pass book.
Bank reconciliation statement process illustration. Cash book, pass book and bank reconciliation statement. Objectives explain the meaning of cash book, pass book, and petty cash book. A bank reconciliation statement is prepared periodically to reconcile the two balances and explain the reasons for the difference between them. Bank reconciliation statement is a statement prepared to reconcile and explain the causes of disagreement between the bank balance as per cash book and the same as per pass book or bank statement as on a particular date. Bank charges charged by the bank only entered in the passbook and not in the cashbook. Reasons for difference between bank balances as per cash book and pass book. Difference between cash book and passbook with comparison. Cash book, pass book, bank reconciliation statement dr.