Bank Reconciliation Statement — Important Questions

Pass Book balance becomes less than Cash Book balance

Step 1: The bank deducts charges (fees, commission, interest on overdraft, etc.) directly from the customer's account without prior intimation. Step 2: When bank charges are deducted, the bank immediately debits the firm's account — this reduces the Pass Book balance. Step 3: However, the firm only records these charges after receiving the bank statement or intimation. Step 4: Until the firm records these charges in its Cash Book, the Cash Book balance remains unchanged (higher). Step 5: Therefore, Pass Book balance becomes LESS than the Cash Book balance when bank charges are deducted by the

No, it is neither compulsory nor is there a fixed date for its preparation

Step 1: Bank Reconciliation Statement is prepared voluntarily by the business firm — it is not a legal or statutory requirement. Step 2: There is NO fixed date on which it must be prepared. Step 3: It is prepared 'from time to time' to check that all banking transactions are properly recorded. Step 4: The purpose is to help the firm detect errors and ascertain the correct bank balance on a particular date. Step 5: Although not compulsory, it is a good practice to prepare BRS regularly (monthly or quarterly) to maintain accuracy in accounts. All options suggesting a fixed/compulsory date are in

The Pass Book balance will be MORE than the Cash Book balance

Step 1: When a debtor directly deposits money into the firm's bank account, the bank immediately credits the firm's account — increasing the Pass Book balance. Step 2: However, the firm does NOT know about this deposit until it receives the bank statement or pass book. Step 3: Since the firm has not yet recorded this receipt in its Cash Book, the Cash Book balance remains unchanged (lower). Step 4: The Pass Book shows a higher balance because it has already recorded the direct deposit. Step 5: This means Pass Book balance > Cash Book balance in this case. The firm will record it in the Cash Bo

Add them to arrive at the Pass Book balance

Step 1: When a cheque is issued by the firm, it is immediately credited (deducted) in the Cash Book — so Cash Book balance is reduced. Step 2: But the bank has NOT yet paid this cheque because it hasn't been presented for payment — so the Pass Book balance is NOT reduced yet. Step 3: This means the Pass Book balance is HIGHER than the Cash Book balance by the amount of these cheques. Step 4: When starting from Cash Book balance and moving towards Pass Book balance, we need to ADD these amounts because the Pass Book hasn't reduced them yet. Step 5: Rule: Cheques issued but not presented for pay