When you maintain a Cash Book in your accounts, your bank also maintains a Pass Book (Bank Statement) for you. Both books record the same transactions — but sometimes their balances do not match.
The statement prepared to explain the difference between Cash Book balance and Pass Book balance is called the Bank Reconciliation Statement (BRS).
Simple Definition: BRS = A statement that bridges the gap between Cash Book balance and Pass Book balance.
Why Do the Two Balances Differ?
There are 3 main categories of reasons:
Category 1 — Time Gap Reasons (Most Common)
Situation
Who Records First?
Why Difference?
Cheque issued but recipient has not gone to bank yet
Only Cash Book (Cr.)
Bank does not know yet
Cheque deposited but bank has not cleared it yet
Only Cash Book (Dr.)
Bank processing pending
Category 2 — Bank Acts Without Telling You
Situation
Who Records First?
Bank deducts charges
Only Pass Book
Bank credits interest
Only Pass Book
Bank collects cheque/bill on your behalf
Only Pass Book
Bank pays insurance/loan EMI directly
Only Pass Book
Customer deposits directly into your account
Only Pass Book
Cheque deposited dishonoured (bounced)
Only Pass Book
Category 3 — Errors (Tricky — Exam Favourite!)
Type of Error
Where it Happens
Wrong amount recorded
Cash Book or Pass Book
Entry recorded twice
Cash Book or Pass Book
Entry completely missed
Cash Book or Pass Book
Casting mistake (addition error)
Cash Book
Cheque recorded in CB but never sent to bank
Cash Book
The Master Rule — Learn This Once, Use Forever
When you START with Cash Book Balance (Favourable/Debit Balance):
Item
Do This
Cheque issued but NOT presented to bank
➕ ADD
Cheque deposited but NOT cleared by bank
➖ DEDUCT
Bank charges NOT in Cash Book
➖ DEDUCT
Interest/Dividend credited by bank NOT in Cash Book
➕ ADD
Direct deposit by customer NOT in Cash Book
➕ ADD
Direct payment by bank (insurance, EMI) NOT in Cash Book
➖ DEDUCT
Cheque deposited dishonoured (bounced) NOT in Cash Book
➖ DEDUCT
Cheque issued returned (technical reason) NOT in Cash Book
➕ ADD
Receipts side of Cash Book undercast
➕ ADD
Payments side of Cash Book undercast
➖ DEDUCT
Receipts side of Cash Book overcast
➖ DEDUCT
Payments side of Cash Book overcast
➕ ADD
Note: Result after applying all items = Pass Book Balance. If starting from Pass Book, FLIP every ADD and DEDUCT.
Overdraft — The Most Confusing Part (Explained Simply)
Normally your Cash Book shows a Debit Balance (money you have). When you spend more than you have, the bank gives you a temporary loan — now your Cash Book shows a Credit Balance. This is called Bank Overdraft (OD).
Situation
Normal Balance
Overdraft (OD)
Cheque issued not presented
➕ ADD
➖ DEDUCT
Cheque deposited not cleared
➖ DEDUCT
➕ ADD
Bank charges not in CB
➖ DEDUCT
➕ ADD
Interest by bank not in CB
➕ ADD
➖ DEDUCT
Level 1 — Basic BRS
QUESTION The Cash Book of Arun shows Dr. balance of ₹15,000 on 31st March 2024. On comparing with Pass Book, the following differences were found: (i) Cheques issued but not yet presented to bank — ₹4,000 (ii) Cheques deposited but not cleared — ₹3,000 (iii) Bank charges not entered in Cash Book — ₹250 (iv) Interest credited by bank not in Cash Book — ₹750 Prepare BRS and find Pass Book balance.
Bank Reconciliation Statement of Arun
As on 31st March 2024
Particulars
₹
₹
Balance as per Cash Book (Dr.)
15,000
ADD:
Cheques issued but not presented to bank
4,000
Interest credited by bank (not in Cash Book)
750
4,750
19,750
LESS:
Cheques deposited but not cleared by bank
3,000
Bank charges not in Cash Book
250
3,250
Balance as per Pass Book (Cr.)
16,500
Level 2 — Find Cash Book Balance (Working Backwards)
QUESTION Pass Book of Meena shows Cr. balance of ₹20,000 on 31st March 2024. (i) Cheques issued but not presented — ₹5,000 (ii) Cheques deposited but not cleared — ₹3,500 (iii) Bank paid LIC premium directly — ₹1,500 (iv) Dividend collected by bank — ₹2,000 (v) Bank charges — ₹300 Find Cash Book balance.
Understanding Casting Errors: Receipts side undercast → CB balance is LESS → ADD the short amount Receipts side overcast → CB balance is MORE → DEDUCT the excess Payments side undercast → CB balance is MORE → DEDUCT the short amount Payments side overcast → CB balance is LESS → ADD the excess
QUESTION Cash Book shows Dr. balance of ₹12,000 on 30th June 2024. (i) Cheques deposited ₹8,000 — only ₹6,500 credited by bank (ii) Receipts column of Cash Book undercast by ₹200 (iii) Customer deposited ₹3,000 directly in bank — only in Pass Book (iv) Cheques issued ₹9,200 — only ₹2,200 presented for payment in July (v) Bank credited interest ₹330; bank charges ₹60 Prepare BRS.
Key Workings Cheques issued not presented = Rs.9,200 – Rs.2,200 = Rs.7,000 Cheques deposited not cleared = Rs.8,000 – Rs.6,500 = Rs.1,500 Receipts undercast -> CB balance is less -> ADD Rs.200
Bank Reconciliation Statement
As on 30th June 2024
Particulars
₹
₹
Balance as per Cash Book (Dr.)
12,000
ADD:
Cheques issued but not presented (9,200 – 2,200)
7,000
CB receipts undercast (add short amount)
200
Customer direct deposit not in CB
3,000
Interest credited by bank
330
10,530
22,530
LESS:
Cheques deposited but not cleared (8,000 – 6,500)
1,500
Bank charges
60
1,560
Balance as per Pass Book (Cr.)
20,970
Level 4 — Wrong Amount Recorded
Golden Rule for Wrong Amount Errors: Adjustment = Correct amount – Wrong amount recorded (adjust only the DIFFERENCE, not full amount!)
QUESTION Cash Book (Dr. balance) ₹25,000 on 31st March 2024. (i) Cheques issued not presented — ₹6,000 (ii) Cheques deposited not cleared — ₹4,500 (iii) Bank charges not in CB — ₹300 (iv) Bank paid insurance ₹2,000 — recorded in CB as ₹200 (v) Interest by bank ₹800 — not in CB (vi) Cheque received ₹2,000 deposited — dishonoured, not in CB
Key Working — Item (iv) Wrong Amount Insurance actually paid = Rs.2,000 Recorded in Cash Book = Rs.200 CB shows Rs.1,800 MORE than it should -> DEDUCT Rs.1,800 (the difference only, NOT the full amount!)
Bank Reconciliation Statement
As on 31st March 2024
Particulars
₹
₹
Balance as per Cash Book (Dr.)
25,000
ADD:
Cheques issued but not presented
6,000
Interest credited by bank (not in CB)
800
6,800
31,800
LESS:
Cheques deposited but not cleared
4,500
Bank charges (not in CB)
300
Insurance short recorded (2,000 – 200)
1,800
Dishonoured cheque (not in CB)
2,000
8,600
Balance as per Pass Book (Cr.)
23,200
Level 5 — Bills of Exchange in BRS
Term
Meaning
Bill Discounted
You gave a bill to bank; bank gave money immediately at a small discount
Bill Retired
Bill paid before due date — bank gives you a rebate (discount for early payment)
Bill Dishonoured
Bill not paid on due date — bank reverses the payment and may charge extra
Bill for Collection
You gave bill to bank to collect on due date — bank credits when collected
QUESTION Cash Book shows Dr. balance of ₹10,000 on 31st December 2024. (i) Cheque to Karan ₹500 — not presented (ii) Bill ₹700 retired — rebate ₹20 — full ₹700 credited in Cash Book (iii) Cheque ₹295 deposited — dishonoured (iv) ₹800 deposited — credited in Pass Book as ₹80 (bank error) (v) Payments side CB undercast by ₹200 (vi) Bill receivable ₹1,000 discounted Nov — dishonoured 31st Dec — not in CB
Key Workings Item (ii): Bill retired. Rebate=20. CB shows 700 but bank credited 680. DEDUCT Rs.20 (rebate only) Item (iv): Bank error – credited 80 instead of 800. Bank credited 720 less. ADD Rs.720 Item (v): Payments undercast -> CB balance is MORE -> DEDUCT Rs.200
Bank Reconciliation Statement
As on 31st December 2024
Particulars
₹
₹
Balance as per Cash Book (Dr.)
10,000
ADD:
Cheque to Karan — not presented
500
Bank error — short credit (800 – 80)
720
1,220
11,220
LESS:
Rebate on bill not recorded in CB (700 – 680)
20
Cheque deposited — dishonoured
295
Payments side CB undercast
200
Bill discounted — dishonoured — not in CB
1,000
1,515
Balance as per Pass Book (Cr.)
9,705
Level 6 — Overdraft (OD) Question
QUESTION Cash Book shows Cr. balance (Overdraft) of ₹8,000 on 31st March 2024. (i) Cheques issued not presented — ₹2,000 (ii) Cheques deposited not cleared — ₹2,500 (iii) Interest on overdraft charged — ₹60 — not in CB (iv) Bank charges — ₹100 — not in CB (v) Pass Book shows credit ₹1,000 — ₹400 by debtor directly + ₹600 interest on investment — not in CB (vi) Cheque ₹200 recorded in CB but never sent to bank
Overdraft Rule — Everything FLIPS! Normal: Cheque issued not presented -> ADD | In OD: -> DEDUCT Normal: Cheque deposited not cleared -> DEDUCT | In OD: -> ADD Normal: Bank charges -> DEDUCT | In OD: -> ADD (increases what you owe)
Bank Reconciliation Statement
As on 31st March 2024
Particulars
₹
₹
Overdraft as per Cash Book (Cr.)
8,000
ADD: (Items that increase overdraft)
Cheques deposited but not cleared
2,500
Interest on OD not in CB
60
Bank charges not in CB
100
2,660
10,660
LESS: (Items that decrease overdraft)
Cheques issued but not presented
2,000
Direct deposit by debtor + interest on investment
1,000
Cheque recorded in CB but never sent to bank
200
3,200
Overdraft as per Pass Book (Dr.)
7,460
Level 7 — Partial Cheques
Key Rule: Only the UNPRESENTED portion causes the BRS difference. Cheques presented BEFORE the date = already in both books = NO difference. Ignore them.
QUESTION Cash Book (Dr. balance) ₹12,000 on 31st March 2024. (i) Total cheques issued ₹10,000 — ₹3,000 presented in March, ₹4,000 presented in April, rest not presented (ii) Total cheques deposited ₹5,000 — ₹1,500 credited in March, rest credited in April (iii) Bank charges ₹100; interest credited ₹200 (iv) CB receipts side undercast ₹500
Key Workings — Partial Cheques Cheques issued not yet presented = Rs.4,000 (April) + Rs.3,000 (never) = Rs.7,000 (Rs.3,000 presented in March = already in both books = no difference) Cheques deposited not cleared = Rs.5,000 – Rs.1,500 = Rs.3,500
QUESTION Starting from Pass Book Cr. balance ₹12,400 on 31st March 2024. (a) Cheques issued not presented ₹500 (b) Cheque issued returned on tech. grounds ₹4,000 — not in CB (c) Cheque deposited not in CB ₹500 (d) Commission charged ₹27; Interest allowed ₹330 (e) Amount wrongly debited by bank ₹2,400 (f) Short credit for cash deposit ₹90 (g) CB credit side undercast ₹200 (h) Insurance premium not in CB ₹600 (i) Bill for collection credited by bank ₹8,000 (j) Bank charges entered TWICE in CB ₹20 (k) Cheque received entered TWICE in CB ₹1,000 (l) Bill discounted dishonoured not in CB ₹5,000 (m) Rebate on payment of bill by bank not in CB ₹200
Bank Reconciliation Statement
As on 31st March 2024 | Starting from Pass Book Balance
Particulars
₹
₹
Balance as per Pass Book (Cr.)
12,400
PLUS ITEMS (to reach Cash Book):
(c) Cheque deposited not recorded in CB
500
(g) CB credit side undercast
200
(j) Bank charges entered twice in CB
20
(i) Bill for collection credited by bank
8,000
(m) Rebate on payment of bill not in CB
200
MINUS ITEMS (to reach Cash Book):
(a) Cheques issued not presented
500
(b) Cheque issued returned — not in CB
4,000
(d) Interest allowed by bank — not in CB
330
(d) Commission charged by bank
27
(e) Amount wrongly debited by bank (bank error)
2,400
(f) Short credit for cash deposit (bank error)
90
(h) Insurance premium not recorded in CB
600
(k) Cheque received entered twice in CB
1,000
(l) Bill discounted dishonoured — not in CB
5,000
Balance as per Cash Book (Dr.) = 12,400 + 8,920 – 13,947
7,373
Master Cheat Sheet — Every Item at a Glance
Item
Start from CB (Dr.)
Start from PB (Cr.)
Cheque issued not presented
➕ ADD
➖ DEDUCT
Cheque deposited not cleared
➖ DEDUCT
➕ ADD
Bank charges not in CB
➖ DEDUCT
➕ ADD
Interest credited by bank not in CB
➕ ADD
➖ DEDUCT
Direct deposit by customer not in CB
➕ ADD
➖ DEDUCT
Direct payment by bank not in CB
➖ DEDUCT
➕ ADD
Cheque dishonoured not in CB
➖ DEDUCT
➕ ADD
Cheque issued returned not in CB
➕ ADD
➖ DEDUCT
CB receipts undercast
➕ ADD
➖ DEDUCT
CB payments undercast
➖ DEDUCT
➕ ADD
CB receipts overcast
➖ DEDUCT
➕ ADD
CB payments overcast
➕ ADD
➖ DEDUCT
Bill discounted dishonoured not in CB
➖ DEDUCT
➕ ADD
Rebate on bill — full amount in CB
➖ rebate only
➕ rebate only
Bank error — excess debit
➕ ADD
➖ DEDUCT
Bank error — short credit
➕ ADD
➖ DEDUCT
5-Minute Exam Revision — Memory Tricks
1. Issued not presented → ADD (from CB) 2. Deposited not cleared → DEDUCT (from CB) 3. Bank does something without telling me → find the direction 4. Overdraft → flip every rule 5. Partial cheques → only unpresented portion counts 6. Wrong amount → adjust only the difference, not full amount 7. Casting error → think: does it make CB more or less?
Swathika B is an MBA graduate in Finance & Business Analytics , the founder of The Commerce Lab. With a strong academic foundation in B.Com BFSI and hands-on experience in financial analysis, data analytics, and business studies, she created this platform to make Commerce and Accountancy simple, practical, and exam-ready for students across India.
