Accounting basics · bank reconciliation

Bank reconciliation statement, explained the simple way.

Your cash book and your bank's pass book almost never show the same balance on the same day — and that's normal. Learn why they differ, the rules for adjusting each item, and work through a full BRS with real numbers that ties out exactly. Written for B.Com, Class 11–12 and CA Foundation students.

Reviewed July 2026
7 min read
CA Anil Agarwal & the TatvaBooks team

What is a bank reconciliation statement?

A Bank Reconciliation Statement (BRS) is a working note prepared by a business to explain why the bank balance in its own cash book doesn't match the balance shown in the bank's pass book (or bank statement) on the same date. It is not a ledger account and it doesn't change either book — it simply lists out every timing difference and error until both balances are proved correct and reconciled to one figure.

The two balances rarely match by coincidence, because a business and its bank don't always record the same transaction on the same day. A BRS is how you confirm that gap is explained, not a mistake — and it's one of the most basic and important internal controls in any business, including in TatvaBooks.

Why cash book and pass book balances differ

Every difference comes down to one of two things: a transaction one side has recorded and the other hasn't yet (a timing difference), or a transaction the bank makes on its own that you only discover from the statement. Here are the causes you'll meet in almost every exam question — and in real business.

Reason for difference	Effect on the two balances
Cheques issued but not yet presented	Cash book (lower balance already) vs pass book (still shows the money) — pass book balance is higher.
Cheques deposited but not yet credited/cleared	Cash book already shows the money in; bank credits it only after clearing — pass book balance is lower.
Bank charges, SMS/annual fees debited by the bank	Bank deducts and informs you later; cash book hasn't recorded it yet — pass book balance is lower.
Interest credited by the bank	Bank adds interest on its own; you record it only on seeing the statement — pass book balance is higher.
Direct credits — NEFT/RTGS from a customer straight to the bank	Bank shows it immediately; your cash book waits for the intimation — pass book balance is higher.
Cheque dishonoured (bounced) after being recorded as received	Cash book still shows it as good money; bank has reversed it — pass book balance is lower.
Direct debits — standing instructions, EMI, insurance premium	Bank deducts automatically; entry reaches the cash book only later — pass book balance is lower.

Notice the pattern: whenever you record something before the bank does, the pass book lags — so you add it back when reconciling from the cash book. Whenever the bank records something before you know about it, the cash book lags — so you subtract it when reconciling from the cash book.

The adjustment rules — starting from the cash book balance

There are two equally valid starting points for a BRS. Most Indian textbooks start from the cash book balance and adjust it to arrive at the pass book balance, like this:

Item	Add or subtract?
Cheques issued but not yet presented for payment	Add
Amounts credited by the bank directly (interest, NEFT received, dividend collected)	Add
Cheques deposited but not yet cleared/credited by the bank	Subtract
Amounts debited by the bank directly (bank charges, EMI, insurance premium)	Subtract
Cheque deposited earlier but later dishonoured	Subtract

If you start from the pass book balance instead, every rule simply flips — what you added above, you now subtract, and vice versa. Both routes must land on the exact same reconciled figure; if they don't, an item is missing or on the wrong side.

Live worked example — a full BRS

Deepak Traders, Nagpur, closes its cash book on 30 April 2026 with a bank balance of ₹1,85,000 (debit). The bank statement for the same date shows a balance of ₹2,22,000. On checking, four items explain the gap:

#	Item	Amount ₹
1	Cheque issued to a supplier on 28 April, not yet presented at the bank	60,000
2	Cheque deposited on 29 April, not yet credited/cleared by the bank	25,000
3	Bank charges debited by the bank, not yet entered in the cash book	2,000
4	Interest credited by the bank, not yet entered in the cash book	4,000

Reconciling from the cash book balance to the pass book balance:

Bank Reconciliation Statement of Deepak Traders as on 30 April 2026
Particulars	Amount ₹	Amount ₹
Balance as per Cash Book (debit balance)		1,85,000
Add: Cheque issued but not yet presented	60,000
Add: Interest credited directly by the bank	4,000	64,000
Less: Cheque deposited but not yet credited	(25,000)
Less: Bank charges debited directly by the bank	(2,000)	(27,000)
Balance as per Pass Book		2,22,000

The reconciled figure of ₹2,22,000 matches the bank statement exactly — the four timing differences fully explain the gap between the cash book and the pass book. That's the whole point of a BRS: it doesn't just fill in a template, it proves your books and the bank's records genuinely agree.

If your working ever lands on a different figure from the actual pass book balance, an item is missing, doubled, or entered on the wrong side — keep checking cheques in transit and bank-only entries until the reconciled figure ties out to the rupee.

Common mistakes & student tips

Wrong direction. Reconciling from the cash book, cheques issued but unpresented are added — students often subtract them by mistake. Draw the "who recorded it first" logic before applying the rule.
Forgetting to flip signs. If a question asks you to start from the pass book balance instead of the cash book, every add/subtract in the earlier table reverses. Re-derive it, don't just copy the cash-book version.
Missing dishonoured cheques. A cheque received and debited to the bank column, then bounced, must be reversed out of the cash book balance — a very common exam trap.
Overdraft balances. If either balance is a credit balance (overdraft), the add/subtract logic reverses again. Always note first whether you're dealing with a debit or credit balance.
Treating BRS as a ledger account. It's a statement, not a double-entry account — there's no debit/credit posting here, only an add/less working that starts and ends with the two balances.
Not tying out. If your BRS doesn't land exactly on the pass book (or cash book) figure, an item is missing, doubled, or on the wrong side. Never round or "adjust" the answer to force a match.

In TatvaBooks, this happens automatically

Working out a BRS by hand teaches you exactly what "reconciled" means — and every accountant should be able to do it on paper. But doing it every month for a real business, cheque by cheque, is slow and easy to get wrong. In TatvaBooks, you import your bank statement and the system matches it line by line against your cash book entries, flags anything unmatched (cheques in transit, bank charges not yet booked, a possible dishonour), and shows you a live reconciled balance — instead of a spreadsheet you rebuild every month.

It's built by Chartered Accountants for Indian businesses, and it's free to start on the Solo plan. See how bank reconciliation stays current on our cloud accounting software and features pages.

Frequently asked questions

What is a bank reconciliation statement (BRS)?

A Bank Reconciliation Statement is a working note that explains the difference between the balance in your own cash book (bank column) and the balance shown in the bank's pass book or statement, on the same date. It doesn't change either book — it simply lists the timing differences (cheques not yet presented, deposits not yet cleared, bank charges not yet recorded, etc.) that account for the gap, and proves both balances are actually correct.

Why do the cash book and pass book balances differ?

Mainly because of timing. Some transactions you record the moment they happen (issuing a cheque, depositing one) but the bank only records them once the cheque actually clears or is presented. Other transactions the bank initiates on its own — interest, bank charges, direct NEFT credits, standing-instruction debits — and you only learn about them when the statement arrives. A BRS lists every one of these gaps until both balances are explained.

Is BRS compulsory, and how often should I prepare it?

It isn't a statutory filing, but it's a basic internal control every business should follow — monthly at minimum, and ideally as often as you get a bank statement. It catches errors early (yours or the bank's), flags dishonoured cheques and unauthorised debits, and is one of the first things an auditor asks for. Most CA Foundation and B.Com syllabi treat it as a core topic for exactly this reason.

Do I start a BRS from the cash book balance or the pass book balance?

Either is correct — you just apply the adjustments in the matching direction. Starting from the cash book balance: add cheques issued but not presented and any amount the bank credited directly, then subtract cheques deposited but not cleared and any amount the bank debited directly. Starting from the pass book balance, every adjustment simply flips sign. Both routes must land on the same reconciled figure.

What if the BRS doesn't tie out?

It means an item is still missing or entered on the wrong side. Recheck every cheque in transit against the next month's statement, confirm bank charges and interest are recorded in the cash book, and look for a transposed amount (a very common error, e.g. ₹4,900 entered as ₹9,400). A BRS that doesn't balance is always fixable — it's a checklist problem, not a mystery.

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