 – Format, Practical Examples & Step-by-Step Guide (2025 Updated)){kind=link}
In every business – whether a small shop, freelance professional, or large corporation – the cash balance shown in your accounting books rarely matches the balance in your bank statement. This difference creates confusion, stress during audits, and sometimes even financial losses if not addressed. That’s where a Bank Reconciliation Statement (BRS) comes in.
A Bank Reconciliation Statement is a tool that explains why your book balance and bank balance differ and proves that after valid adjustments, both are actually correct and reconciled.
In this comprehensive, AdSense-optimized guide (1000+ words), you’ll learn:
- What is Bank Reconciliation Statement?
- Why is BRS important?
- Standard Format of BRS
- Step-by-step preparation process
- 5 Real-life practical examples
- Common errors and how to avoid them
- Pro tips for faster reconciliation
Let’s dive in!
What is a Bank Reconciliation Statement (BRS)?
A Bank Reconciliation Statement is a statement prepared (usually monthly) to reconcile the cash balance as per the company’s cash book (book balance) with the balance as per the bank statement (bank balance) on a particular date.
It identifies and explains differences caused by:
- Timing differences (e.g., cheques issued but not presented)
- Errors by the company or bank
- Items recorded only by bank (bank charges, interest, direct deposits, etc.)
After reconciliation, both balances should tally.
Why is Bank Reconciliation Important?
- Detects errors and fraud early
- Ensures accurate cash position
- Helps in proper financial planning
- Required for audits and tax filings
- Prevents overdraft surprises
- Identifies unrecorded bank charges/interest
- Builds trust with stakeholders
According to a 2024 survey by the Association of Certified Fraud Examiners (ACFE), companies that perform monthly bank reconciliation detect fraud 50% faster.
Standard Format of Bank Reconciliation Statement
There are two popular formats:
Format 1: Starting with Cash Book Balance (Most Common)
Bank Reconciliation Statement as on 31st December 2025
Particulars | Amount (₹) | Amount (₹)
-------------------------------------------------|------------|------------
Balance as per Cash Book (Book balance) | | 1,25,000
Add: | |
• Cheques issued but not presented | 18,000 |
• Interest credited by bank not recorded | 1,200 |
• Direct deposit by customer | 15,000 | 34,200
| |------------
| | 1,59,200
Less: | |
• Cheques deposited but not cleared | 12,500 |
• Bank charges debited by bank | 350 |
• Dishonoured cheque not recorded | 5,000 | 17,850
| |------------
Balance as per Bank Statement (Pass Book) | | 1,41,350Format 2: Starting with Bank Statement Balance
Bank Reconciliation Statement as on 31st Dec 2025
Particulars | Amount (₹)
-------------------------------------------------|------------
Balance as per Pass Book (Bank Statement) | 1,41,350
Add: |
• Cheques deposited but not cleared | 12,500
• Bank charges wrongly debited | 500
Less: |
• Cheques issued but not presented | 18,000
• Direct collection by bank not recorded | 1,200
Balance as per Cash Book | 1,25,000Most businesses and CA/CS exams prefer Format 1 (starting with cash book).
Step-by-Step Process to Prepare BRS
- Take the closing balance from your cash book.
- Take the closing balance from the latest bank statement.
- Tick (✓) all items that appear in both (already matched).
- List items only in cash book → adjust in BRS.
- List items only in bank statement → adjust in BRS.
- Adjust additions and subtractions.
- Final reconciled balance should match the other side.
Practical Example 1: Basic Reconciliation
Cash Book balance on 31-Dec-2025: ₹85,000 (Dr) Bank Statement balance on 31-Dec-2025: ₹71,300 (Cr)
Differences found:
- Cheque No. 2101 for ₹8,500 issued but not presented
- Cheque No. 2105 for ₹4,200 deposited but not cleared
- Bank charged ₹180 as service fee (not recorded)
- Bank credited ₹1,080 interest (not recorded)
Solution (Format 1):
Bank Reconciliation Statement as at 31st Dec 2025
Particulars | ₹ | ₹
-------------------------------------------|--------|---------
Balance as per Cash Book | | 85,000
Add: Cheque issued but not presented | 8,500 |
Interest credited by bank | 1,080 | 9,580
| |---------
| | 94,580
Less: Cheque deposited but not cleared | 4,200 |
Bank charges | 180 | 4,380
| |---------
Balance as per Bank Statement | | 71,300Practical Example 2: Overdraft Situation
Cash Book shows overdraft ₹25,000 Bank Statement shows overdraft ₹38,700
Adjustments:
- Cheques issued ₹12,500 not presented
- Cheques deposited ₹5,000 not cleared
- Bank debited ₹300 for charges
BRS:
Balance as per Cash Book (Overdraft) | (25,000)
Add: Cheques issued but not presented | 12,500
|---------
| (12,500)
Less: Cheques deposited but not cleared | 5,000
Bank charges | 300
|---------
Balance as per Bank (Overdraft) | (38,700)Practical Example 3: With Dishonoured Cheque
Cash Book balance: ₹1,50,000 Bank balance: ₹1,34,200
Reasons:
- Cheque ₹10,000 deposited returned dishonoured (not recorded in cash book)
- Cheque ₹8,500 issued but not presented
- Direct deposit by customer ₹15,000 recorded by bank only
BRS:
Balance as per Cash Book | 1,50,000
Add: Cheques issued but not presented | 8,500
Direct deposit by customer | 15,000 | 23,500
| |----------
| | 1,73,500
Less: Dishonoured cheque | 10,000 | 10,000
| |----------
Balance as per Bank | | 1,34,200Practical Example 4: Error by Bank
Bank wrongly debited ₹2,000 instead of ₹200 (error ₹1,800)
Cash Book: ₹95,000 Bank Statement: ₹93,200
BRS will add back the excess debit of ₹1,800 to reach correct bank balance.
Practical Example 5: Large Business (Real Template)
ABC Ltd. has: Cash Book (31-Mar-2025): ₹4,85,000 Bank Statement: ₹4,12,350
Items:
- Cheques issued ₹95,000 not presented
- Cheques deposited ₹48,500 not cleared
- Bank interest ₹3,200 credited
- Bank charges ₹850
- Insurance premium paid by bank ₹2,500 (standing instruction)
- Wrong credit by bank ₹5,000 (belongs to another account)
Complete BRS:
Bank Reconciliation Statement – ABC Ltd.
as on 31st March 2025
Particulars | Amount (₹)
------------------------------------------------------|------------
Balance as per Cash Book | 4,85,000
Add:
Cheques issued but not yet presented | 95,000
Interest credited by bank | 3,200
|------------
| 5,83,200
Less:
Cheques deposited but not cleared | 48,500
Bank charges | 850
Insurance paid by bank (standing instruction) | 2,500
Wrong credit given by bank | 5,000
|------------
| 56,850
|------------
Balance as per Bank Statement | 4,12,350Common Mistakes to Avoid in BRS
- Forgetting to reverse dishonoured cheques
- Treating bank charges as addition instead of subtraction
- Not updating cash book first for bank-only items
- Comparing wrong dates
- Ignoring small differences (they may hide big frauds!)
Pro Tips for Faster Bank Reconciliation
- Update cash book first for bank charges, interest, direct credits/debits
- Use accounting software (Tally, QuickBooks, Zoho Books) – auto reconciliation feature
- Reconcile weekly if transaction volume is high
- Keep scanned copies of cheques
- Assign serial numbers to cheques
- Use bank feeds and APIs (available in most modern software)
Conclusion
A properly prepared Bank Reconciliation Statement is not just a compliance exercise – it’s your first line of defense against errors, fraud, and cash flow surprises.
Whether you’re a student preparing for CA, CS, CMA, ACCA exams or a business owner managing real accounts, mastering BRS is non-negotiable.
Start reconciling your bank statement this month – even a ₹100 difference can reveal bigger issues!
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