Accounting · Accounting Process

Bank Reconciliation Statement (BRS) for CA Foundation

Updated 1 October 2026

A bank reconciliation statement lists the items that explain the difference between the bank balance in your cash book and the balance in the bank's passbook. You start from one balance, add or deduct each reconciling item in the correct direction, and arrive at the other balance.

Understand Bank Reconciliation Statement

Your cash book is the bank record kept by the business. The passbook (bank statement) is the record kept by the bank. Both record the same account, so in theory the balances should match. In practice they often differ.

The differences arise for two reasons. The first is timing: the business has recorded a transaction but the bank has not yet, or the other way round. A cheque issued but not yet presented is an example. The second is entries known to only one side, such as bank charges or interest that the bank has charged directly, or errors made in one of the books.

A bank reconciliation statement (BRS) is a statement, not an account. It does not change any ledger. It only explains the gap between the two balances so you can confirm that both are correct once the items are accounted for.

Remember the viewpoint. A debit balance in the cash book means money in the bank, called a favourable balance. The same money appears as a credit balance in the passbook, because the bank owes it to you. An overdraft is the opposite: it is a credit balance in the cash book and a debit balance in the passbook.

The main reconciling items are these:
- Cheques issued but not yet presented for payment.
- Cheques deposited but not yet collected or credited by the bank.
- Direct credits by the bank, such as interest, dividends or customer deposits.
- Direct debits by the bank, such as charges, standing instructions or insurance premium.
- Dishonoured cheques, which the bank has debited but you may not have recorded.

Key rules to remember

Starting from cash book (favourable balance): Balance as per passbook = Cash book balance + cheques issued not presented + direct credits by bank not in cash book − cheques deposited not credited − direct debits by bank not in cash book; Use this on the unadjusted cash book, before bank-only items are posted. An item that makes the passbook higher than the cash book is added. An item that makes the passbook lower is deducted.
Starting from passbook (favourable balance): Balance as per unadjusted cash book = Passbook balance + cheques deposited not credited + direct debits by bank not in cash book − cheques issued not presented − direct credits by bank not in cash book; This is the reverse of the first rule. Every sign flips. An item that makes the cash book higher than the passbook is added. A direct debit has already lowered the passbook but not the cash book, so you add it back. A direct credit has already raised the passbook but not the cash book, so you deduct it. The result is the cash book balance before adjustment. Once you post the bank-only items to the cash book, you get the adjusted cash book balance.
Overdraft rule: If the starting balance is an overdraft, reverse every sign used for a favourable balance; Treat the overdraft as a negative figure. Check that your final answer is labelled correctly as an overdraft or a favourable balance.
Which items need cash book correction: Items known only to the bank (charges, interest, direct credits and debits, dishonour) need a cash book entry. Timing items (unpresented and uncredited cheques) need none.; This sorts items when you prepare an adjusted cash book.

How to solve Bank Reconciliation Statement questions

Use this method for any BRS question. It works whether you start from the cash book or the passbook.

1Read the question and note the starting balance and whether it is favourable or an overdraft. Note whether the question wants the BRS as per cash book or as per passbook.
2Write the heading: Bank Reconciliation Statement as on (date). Write the opening line as Balance as per cash book (or passbook), and mark it favourable or overdraft.
3Go through each item in the question one by one. Decide whether it affects the cash book, the passbook, or both. Ignore items that are already recorded in both.
4For each item, decide whether it increases or decreases the balance you are moving to. Use the sign rules from the formulas section.
5Write each item on its own line with a plus or minus and a short description. Do not combine items.
6Total the items and reach the closing balance. State whether it is balance as per passbook or cash book.
7If the question asks for an adjusted cash book, first correct the cash book for bank-only items and errors, then prepare the BRS from the adjusted balance.

Quickest way: Three-pile method with a sign check

When to use it: Use this when the question lists many items and you have limited time. It helps you avoid sign errors.

Make three piles in the margin: items affecting only the cash book, items affecting only the passbook, and items already in both. Cross out the last pile.
For the starting balance of an unadjusted favourable cash book, ask: does this item make the bank's figure bigger than mine? If yes, add. If no, deduct.
For a passbook start, reverse the thinking: does this item make the unadjusted cash book figure bigger than the bank's? If yes, add. If no, deduct.
Do a quick cross-check. For a favourable balance, cheques issued not presented make the cash book balance lower than the passbook (the bank's balance is higher), and cheques deposited not credited make the cash book balance higher than the passbook (the bank's balance is lower). Reverse the comparison for an overdraft.
Write the final line clearly, with the label and the amount, so you earn the closing marks even if a middle step is wrong.

Common mistakes in Bank Reconciliation Statement

Using the wrong sign for items when the opening balance is an overdraft
Students memorise add and deduct rules for a favourable balance and apply them blindly.
Fix: For an overdraft, reverse every sign. Or write the overdraft as a negative number and apply the normal rules.
Adjusting for items that are already in both books
Students feel every item in the question must appear in the BRS.
Fix: Check each item for whether both books have it. If so, it does not belong in the BRS.
Treating a cheque deposited but not credited as a cheque issued not presented
Both are timing differences and both involve cheques, so they look alike.
Fix: Ask who gave the cheque. If you received it, it is a deposit. If you wrote it, it is an issue.
Forgetting that bank charges and interest need a cash book entry
Students treat every item as a BRS item only.
Fix: If the question asks for an adjusted cash book, record bank-only items first. Then prepare the BRS using the adjusted balance.
Mixing up debit and credit between the two books
The bank's debit and credit are the reverse of the business's.
Fix: Remember that a favourable cash book balance is a credit balance in the passbook. Keep this in mind while reading the items.
Leaving out the final label or the date
Students rush the last line.
Fix: Always write the heading with the date and end with the balance as per passbook or cash book.

Worked examples

Example 1

On 31 March 2025, the cash book of Meera Traders shows a bank balance of ₹48,000 (debit). Cheques issued of ₹6,500 have not been presented. Cheques deposited of ₹9,000 have not been credited by the bank. The bank has charged ₹300 as bank charges, which is not yet in the cash book. Prepare a BRS to find the balance as per passbook.

Show the solution

Start with the balance as per the unadjusted cash book: ₹48,000 (favourable).
Cheques issued not presented: the bank has not yet paid them, so its balance is higher than the cash book. Add ₹6,500. Total = ₹54,500.
Cheques deposited not credited: the bank has not yet added them, so its balance is lower than the cash book. Deduct ₹9,000. Total = ₹45,500.
Bank charges of ₹300: the bank has already deducted them in the passbook, but the cash book has not recorded them. The passbook is lower than the cash book by this amount, so deduct ₹300. Total = ₹45,200.
Check: the passbook already includes the ₹300 charge, so it is not deducted a second time. It is deducted once here only because we started from a cash book that does not yet show it.

Answer: Balance as per passbook on 31 March 2025 is ₹45,200 (favourable).

Example 2

The passbook of Rohit Enterprises on 30 June 2025 shows a credit balance of ₹72,000. The following are noted. Cheques issued of ₹11,000 have not been presented. Cheques deposited of ₹7,000 have not been collected. The bank has credited ₹1,500 as interest, which is not in the cash book. A customer's cheque of ₹2,000 deposited earlier has been dishonoured and debited by the bank, but the cash book does not show it. Find the balance as per cash book before adjustment, and the adjusted cash book balance.

Show the solution

Start with the balance as per passbook: ₹72,000 (favourable).
Cheques issued not presented: the cash book has already deducted them, but the passbook has not. Deduct ₹11,000. Total = ₹61,000.
Cheques deposited not collected: the cash book has already added them, but the passbook has not. Add ₹7,000. Total = ₹68,000.
Interest credited by the bank: the passbook has added it but the cash book has not. Deduct ₹1,500 to reach the unadjusted cash book. Total = ₹66,500.
Dishonoured cheque: the bank has deducted it in the passbook, but the cash book still shows the money as received. The passbook is lower than the cash book by this amount, so add ₹2,000. Total = ₹68,500. This is the balance as per the unadjusted cash book.
Now post the bank-only items to the cash book: add interest ₹1,500 and deduct the dishonoured cheque ₹2,000. Adjusted cash book balance = ₹68,500 + ₹1,500 − ₹2,000 = ₹68,000.
Check: passbook ₹72,000 − ₹11,000 + ₹7,000 = ₹68,000, which matches the adjusted cash book.

Answer: Balance as per cash book before adjustment is ₹68,500 (favourable). Balance as per adjusted cash book is ₹68,000 (favourable).

Exam tips

Write the BRS in a neat two-column format with particulars and amount. Clear presentation earns step marks even if one sign is wrong.
Read whether the question gives a favourable balance or an overdraft before touching any item. This is the most common trap.
If the question asks for an adjusted cash book, do that first. Show each correction on its own line.
Ignore items that appear in both books. Examiners include them as distractors.
Finish with the cross-check on timing items. It takes ten seconds and catches most sign errors.

Practice questions from Accounting Process

Bank Reconciliation Statement: frequently asked questions

Why do the cash book and passbook balances differ?

They differ because of timing and one-sided entries. Cheques may be issued or deposited but not yet processed by the bank. The bank may also record charges, interest or dishonoured cheques that the business has not yet entered.

Is a bank reconciliation statement a ledger account?

No. It is only a statement that explains the difference between two balances. It does not change any ledger and is not part of the double-entry system.

How do I treat an overdraft in a BRS?

An overdraft is a credit balance in the cash book and a debit balance in the passbook. When the starting balance is an overdraft, reverse every sign you would use for a favourable balance.

Do all BRS items need a cash book entry?

No. Only items known to the bank alone, such as charges, interest and dishonour, or errors in the cash book, need an entry. Cheques issued but not presented and cheques deposited but not credited are timing items and need no entry.