Fundamentals of Accounting · Bank Reconciliation Statement

Preparing a Bank Reconciliation Statement from Cash Book Balance

Updated 11 October 2026 · Fact-checked

A bank reconciliation statement starting from the cash book balance begins with that balance and adjusts it for every item that explains the gap with the pass book. With a favourable balance, add items that raise the bank's figure and deduct items that lower it. The result equals the pass book balance.

Understand Preparing BRS Starting from Cash Book Balance

Your cash book records bank transactions as you see them. The pass book (bank statement) records them as the bank sees them. The two balances often differ because of timing gaps or items one side has not yet recorded. A bank reconciliation statement (BRS) explains the difference.

When you start from the cash book balance, you treat it as your opening figure. You then ask of each item: has the bank already done this while my cash book has not, or have I done it while the bank has not? Your adjustments move the cash book figure step by step to the pass book figure.

A favourable balance means money in the bank, a debit balance in the cash book. For the bank, this is a credit balance. An overdraft means you owe the bank, a credit balance in the cash book. For the bank, this is a debit balance. The adjustment signs reverse between the two cases.

The logic is simple. Take a favourable balance. A cheque you issued but the bank has not yet paid means the bank still shows more money than you do, so you add it. A cheque you deposited but the bank has not yet collected means the bank shows less than you do, so you deduct it. Bank charges that you have not yet recorded are deducted for the same reason.

You do not change the cash book in this method. You only build a statement that bridges the two balances. Always state clearly at the end whether the final figure is a balance or an overdraft as per the pass book.

Key rules to remember

Favourable cash book balance: items to ADD: Add: cheques issued but not yet presented; interest or dividend collected by bank and not yet in cash book; direct deposits by customers; These make the bank balance higher than the cash book balance.
Favourable cash book balance: items to DEDUCT: Deduct: cheques deposited but not yet collected; bank charges; interest on overdraft; direct payments by bank (standing instructions, premium); dishonoured cheques; These make the bank balance lower than the cash book balance.
Favourable balance result: Balance as per cash book + additions − deductions = Balance as per pass book; The final figure is the credit balance in the pass book.
Overdraft per cash book: items to ADD: Add: cheques deposited but not yet collected; bank charges; interest on overdraft; direct payments by bank; dishonoured cheques; These increase the overdraft shown by the bank.
Overdraft per cash book: items to DEDUCT: Deduct: cheques issued but not yet presented; interest or dividend collected by bank; direct deposits by customers; These reduce the overdraft shown by the bank.
Overdraft result: Overdraft as per cash book + additions − deductions = Overdraft as per pass book; Label the final figure as an overdraft.

How to solve Preparing BRS Starting from Cash Book Balance questions

Use this method for any question that gives the cash book balance and asks for the pass book balance.

1Read the opening figure and check whether it is a favourable balance (debit) or an overdraft (credit) as per the cash book.
2Write the heading: Bank Reconciliation Statement as on (date). Add the starting line: Balance (or Overdraft) as per Cash Book.
3List every item in the question and tick it off as you go. Ignore items that do not affect the bank balance.
4For each item, decide whether it makes the bank's figure higher or lower than your cash book figure. For a favourable balance, higher means add and lower means deduct. For an overdraft, higher means deduct and lower means add.
5Place the items under two groups, Add and Less, and total each group.
6Compute the final figure and label it Balance (or Overdraft) as per Pass Book.
7Check the figure against the pass book balance if the question gives it. If the numbers do not agree, look for a missed item or a wrong sign.

Quickest way: The Bank-Already-Knew Test

When to use it: Use it when the question has many items and you are short of time.

Ask for each item: did the bank already process it while my cash book did not? Examples are bank charges, interest and direct deposits. Or did I record it while the bank has not? Examples are cheques issued or deposited but not yet cleared.
For a favourable balance, remember the pattern: cheques issued not presented are added. Cheques deposited not collected are deducted. Bank charges, dishonoured cheques and direct debits are deducted. Interest, dividends and direct deposits are added.
For an overdraft, flip every sign from the favourable case.
Total the additions and the deductions, then compute the final figure in one line.
Write the label (balance or overdraft) before you leave the line.

Common mistakes in Preparing BRS Starting from Cash Book Balance

Using the favourable-balance signs when the cash book shows an overdraft
Students learn one set of rules and apply it automatically without checking whether the opening balance is a debit or credit.
Fix: Underline the words 'overdraft' or 'credit balance' in the question before you start. If you see them, flip every sign.
Treating cheques issued but not presented as a deduction in a favourable balance
Students think any payment lowers the balance, but your cash book has already reduced the balance and the bank has not.
Fix: Remember that the cash book is ahead of the bank on this item. Add it back to reach the bank's higher figure.
Adjusting for items that are already in both books
Students rush and adjust every figure in the question, including items recorded by both sides.
Fix: Adjust only for items that appear in one record and not the other.
Forgetting dishonoured cheques or direct payments
These items are mentioned in the pass book extract and not in the cash book, so they are easy to overlook.
Fix: Go through the list of pass book entries line by line and mark each one as recorded or not recorded in the cash book.
Writing the final figure without saying whether it is a balance or an overdraft
Students stop once the arithmetic is done.
Fix: Always label the last line as Balance as per Pass Book or Overdraft as per Pass Book.
Showing a negative figure instead of switching to an overdraft
If deductions exceed the starting balance, students write a minus sign and do not interpret it.
Fix: A negative result from a favourable start means an overdraft per the pass book. State it that way.

Worked examples

Example 1

The cash book of Sharma Traders shows a bank balance of ₹45,000 (debit) on 31 March. Cheques of ₹8,000 issued have not yet been presented. Cheques of ₹12,000 deposited have not yet been collected. The bank charged ₹300 as charges, which are not in the cash book. The bank credited ₹1,200 as interest, not yet in the cash book. A customer deposited ₹5,000 directly into the bank, not yet in the cash book. Prepare a BRS to find the pass book balance.

Show the solution

Start with the balance as per cash book: ₹45,000 (favourable).
Add cheques issued but not presented: ₹8,000.
Add interest credited by bank: ₹1,200.
Add direct deposit by the customer: ₹5,000.
Total after additions: 45,000 + 8,000 + 1,200 + 5,000 = ₹59,200.
Deduct cheques deposited but not collected: ₹12,000.
Deduct bank charges: ₹300.
Total deductions: ₹12,300.
Balance as per pass book: 59,200 − 12,300 = ₹46,900.

Answer: Balance as per pass book = ₹46,900 (credit).

Example 2

The cash book of Mehta & Co. shows a bank overdraft of ₹20,000 on 31 December. Cheques of ₹6,000 deposited have not yet been collected. Cheques of ₹9,000 issued have not yet been presented. Bank charges of ₹250 are not yet in the cash book. The bank collected a dividend of ₹2,000, not yet in the cash book. The bank paid an insurance premium of ₹1,500 under a standing instruction, not yet in the cash book. Find the overdraft as per the pass book.

Show the solution

Start with overdraft as per cash book: ₹20,000.
Add cheques deposited but not collected: ₹6,000.
Add bank charges: ₹250.
Add insurance premium paid by bank: ₹1,500.
Total after additions: 20,000 + 6,000 + 250 + 1,500 = ₹27,750.
Deduct cheques issued but not presented: ₹9,000.
Deduct dividend collected by bank: ₹2,000.
Total deductions: ₹11,000.
Overdraft as per pass book: 27,750 − 11,000 = ₹16,750.

Answer: Overdraft as per pass book = ₹16,750.

Exam tips

Write the full format with heading, date and two clear columns or lists. Presentation earns marks in a written paper.
Use the final line label every time: 'Balance as per Pass Book' or 'Overdraft as per Pass Book'.
Read the opening balance word by word. Questions often swap between 'balance' and 'overdraft' in the same exercise.
If the question gives the pass book balance, use it as a check. A mismatch means an item was missed or a sign is wrong.
Show each item on its own line with the amount. Even if the total is wrong, you can still earn marks for correct treatment of individual items.

Practice questions from Bank Reconciliation Statement

Preparing BRS Starting from Cash Book Balance in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CA FoundationPreparing BRS Starting from Cash Book Balance

Preparing BRS Starting from Cash Book Balance: frequently asked questions

How do I prepare a BRS from the cash book balance?

Write the cash book balance first. Add the items that make the bank figure higher and deduct the items that make it lower. The final figure is the pass book balance.

What changes in a BRS when the cash book shows an overdraft?

Every sign reverses. Cheques deposited but not collected, bank charges and direct payments by the bank are added. Cheques issued but not presented, and interest or direct deposits received by the bank, are deducted.

Why is a cheque issued but not presented added to a favourable cash book balance?

Your cash book has already reduced your balance for the cheque, but the bank has not yet paid it. So the bank still shows a higher balance. You add the amount to reach that figure.

Do I need to correct the cash book in this method?

No. The method only builds a statement that links the two balances. If the question asks for corrected entries, that falls under adjusted cash book work.