16 Most Important Bank Reconciliation Statement Entries

Welcome back! Did you remember the story of Chand and Pasha in my Introductory lesson of BRS? If not, go and check out!

Well, Chand felt really bad because his friend is no more with him and he is facing problems on both personal and business front. He thought to himself that whenever he needs, Pasha has always helped him. His friend was one of the biggest supports he had but now he is not with him. Then Chand decides to look out for thing that built these differences. Chand recalls all the events which cause the miscommunication and also think about how to fill these gaps. Thus, he decides to meet his friend and settle the issues between them. They both realise that their miscommunication or improper communication between them and silly mistakes done by them causes this break-up and hence they both get back their friendship which also make them reach new heights in their career.

So, in this lesson, I will tell you what Chand did to eliminate the differences between him and his friend Pasha.

We already learned that these are the main items which usually cause the difference between the cashbook and passbook balances:

1. Entries recorded in cash book but not recorded in passbook.
2. Entries recorded in passbook but not recorded in cash book.
3. Error Entries recorded in cashbook or passbook.

    Here is the list of 16 most Important BRS entries you may come across:

1. Cheque issued but not presented for payment.
2. Cheque directly deposited by the customer
3. Cheque deposited into bank but omitted to be recorded in the cash book.
4. Cheque issued but dishonoured by the bank.
5. Interest on investment, dividend etc. collected/ Credited by bank in passbook but not entered in the cash book.
6. Wrong credits recorded in passbook/cash book.
7. Under casting or posting of lower amount in the debit side of a) cash book b) passbook
8. Overcasting or posting of excess amount in the credit side of a) cash book b) passbook
9. Cheque deposited/sent for collection but not credited/collected by bank.
10. Cheque debited in the cash book but forgotten to send to bank for collection
11. Cheque deposited dishonoured but not recorded in cash book.
12. Discounted bill dishonoured and debited in passbook only.
13. Interest on investments, bank charges etc., debited in passbook only
14. Wrong debits in cash book/passbook
15. Under casting or posting of lower amount in the credit side of a) cash book b) passbook.
16. Overcasting or posting excess amount in the debit side of a) cash book b) passbook

Observe the following for understanding causes and their treatments:

Let's try to understand the above table in detail:

1. Cheque issued but not presented for payment.: Assume yourself as a Businessmen and you have issued a cheque to make the payment, but it is yet to be presented for payment in the bank as on that particular date. But you already recorded in your cashbook that payment was made so your cash book is less and passbook is more. This cause the difference between the two balances which can be rectified by adding the cheque’s amount in the given debit balance or deducting the amount from the given credit balance.
2. Cheque directly deposited by the customer: Here, one of your customers directly paid you into the bank (bank transfer or cheque deposited) but you are yet to be informed. So, in this case, you have received the payment but your cash book is less as it is not recorded as on that date and passbook is more. This cause the difference between the two balances which can be rectified by adding the amount in the given debit balance or deducting the amount from the given credit balance.
3. Cheque deposited into bank but omitted to be recorded in the cash book: Here, you can see you have deposited your cheque into the bank but you forget to enter it in your cash book. because of this omission, your cash book is less and your passbook is more. This cause the difference between the two balances which can be rectified by adding the amount of the cheques in the given debit balance or deducting the amount from the given credit balance.
4. Cheque issued but dishonoured by the bank: In this case, cheque you have issued got dishonoured by the bank due to lack of fund availability/expired cheque or whatever the reason may be. The cold truth is your cheque bounced, but you didn’t record it in your cash book which means cash book is less but passbook is more. This cause the difference between the two balances which can be rectified by adding the amount of the cheques in the given debit balance or deducting the amount from the given credit balance.
5. Interest on investment, dividend etc. collected/ Credited by bank in passbook but not entered in the cash book: Here,  Interest on investment or Interest on dividend means you have invested in some debentures or securities and now you received your share in the form of interest or dividend directly in your bank so it is credited in passbook only which means passbook is more and cashbook is still less because of no entry. This cause the difference between the two balances which can be rectified by adding the amount in the given debit balance or deducting the amount from the given credit balance.
6. Wrong credits recorded in the passbook/cash book: Wrong credits means passbook deposits and cashbook payments. Well, mistakes or errors made by the firm or bank must be rectified because this can too cause the differences between the two books.

a)     Wrong credit in passbook – means increase in deposits which make passbook balance more and cashbook balance less so this causes the difference between the two balances which can be rectified by adding the amount in the given debit balance or deducting the amount from the given credit balance. 

b)    Similarly, wrong credit in cashbook – means an increase in payments which make cashbook balance less and passbook balance more which causes the difference between the two balances which can be rectified by adding the amount in the given debit balance or deducting the amount from the given credit balance.

7. Under casting or posting of lower amount in the debit side of a) cash book b) passbook: Under casting means recording a less amount than the actual amount by mistake. This error too causes the difference in both the balances.

a)     Under casting debit side of cash book – means a decrease in Receipts which make the cash book balance less and passbook balance more thus can be rectified by adding the remaining amount in the given debit balance or deducting the remaining amount from the given credit balance.

b)    Under casting debit side of passbook – means a decrease in withdrawals which make the passbook balance more and cash book balance less thus can be rectified by adding the remaining amount in the given debit balance or deducting the remaining amount from the given credit balance. 

Note: Here, the remaining amount means the amount which is not recorded for example cash book is debited with 200 instead of 2,000 thus, this error can be rectified by adding 1,800 (2,000 – 200) is given debit balance or deducting 1,800 from the given credit balance.

8. Overcasting or posting of excess amount in the credit side of a) cash book b) passbook: Overcasting means recording a higher amount than the actual amount by mistake. This error too causes the difference in both the balances.

a)     Overcasting credit side of cash book – means an increase in payments which make the cash book balance less and passbook balance more thus can be rectified by adding the excess amount in the given debit balance or deducting the excess amount from the given credit balance. 

b)    Overcasting credit side of passbook – means an increase in deposits which make the passbook balance more and cashbook balance less thus can be rectified by adding the excess amount in the given debit balance or deducting the excess amount from the given credit balance. 

Note: Excess amount means the amount which is additionally recorded. For example: cash book is credited with 20,000 instead of 2,000. Thus, this error can be rectified by adding 18,000 (20,000 – 2,000) in the given debit balance and deducting 18,000 from the given credit balance.

9. Cheque deposited/sent for collection but not credited/collected by bank: Now, imagine one of the customers make the payment through cheque so you sent that cheque to the bank for collection but it is not yet credited by the bank as on that particular date. Hence, your passbook is still less as it not credited and cash book is more as we already debited as cheque is received. This cause the difference between the two balances which can be rectified by deducting the cheque’s amount from the given debit balance or adding the cheque’s amount in the given credit balance.
10. Cheque debited in the cash book but forgotten to send to bank for collection: Here, you debited the cheque amount in the cash book but you forgot to send the cheque for collection. Same as the above cash book is more and passbook is less. So, this too causes the difference between the two balances which can be rectified by deducting the cheque’s amount from the given debit balance or adding the cheque’s amount in the given credit balance.
11. Cheque deposited dishonoured but not recorded in cash book: In this case, the cheque is deposited which got dishonoured by the bank but you didn’t record that in your cash book. Now, your cashbook is more and passbook is less due to dishonour. This cause the difference between the two balances which can be rectified by deducting the cheque’s amount from the given debit balance or adding the cheque’s amount in the given credit balance.
12. Discounted bill dishonoured and debited in passbook only: Ok sometimes, you need to accept bills of exchange for credit transactions. Suppose one of the customer purchase goods from you on credit and promise to pay the bill amount after a particular period, but you need money right now so you can go to the bank and encash the bill by discounting with the bank, later bank gets paid on the due date. But here what happened your discounted bill got dishonoured due to non-payment and bank debit the dishonoured bill in the passbook only so passbook is less and cash book is more. This cause the difference between the two balances which can be rectified by deducting the bill’s amount from the given debit balance or adding the bill’s amount in the given credit balance.
13. Interest on investments, bank charges etc., debited in passbook only: Interest on Investments, bank charges etc are debited in passbook only so that means passbook is less and cash is more as no transaction recorded in cash book. This cause the difference between the two balances which can be rectified by deducting the amount from the given debit balance or adding the amount in the given credit balance.
14. Wrong debits in cash book/passbook: Wrong debits means cash book receipts and passbook withdrawals. Well, we already discussed mistakes or errors made by the firm or bank must be rectified as well. Because this can too cause the differences between the two books.

a)     Wrong debits in cash book – means increase in receipts which make cash book balance more and passbook balance less so this causes the difference between the two balances which can be rectified by deducting the amount from the given debit balance or adding the amount in the given credit balance.

b)    Similarly, wrong debits in passbook – means an increase in withdrawals which make passbook balance less and cash book balance more which causes the difference between the two balances which can be rectified by deducting the amount from the given debit balance or adding the amount in the given credit balance.

15. Under casting or posting of lower amount in the credit side of a) cash book b) passbook: Under casting means recording a less amount than the actual amount by mistake. This error too causes the difference in both the balances.

a)     Under casting credit side of cash book – means a decrease in payments which make the cash book balance more and passbook balance less thus can be rectified by deducting the remaining amount from the given debit balance or adding the remaining amount in the given credit balance.

b)    Under casting credit side of passbook – means a decrease in deposits which make the passbook balance less and cashbook balance more thus can be rectified by deducting the amount from the given debit balance or adding the amount in the given credit balance. 

16. Overcasting or posting excess amount in the debit side of a) cash book b) passbook: Overcasting means recording a higher amount than the actual amount by mistake. This error too causes the difference in both the balances.

a)     Overcasting debit side of the cash book – means an increase in receipts which make the cash book balance more and passbook balance less thus can be rectified by deducting the excess amount from the given debit balance or adding the excess amount in the given credit balance. 

b)    Overcasting debit side of passbook – means an increase in withdrawals which make the passbook balance less and cash book balance more thus can be rectified by deducting the excess amount from the given debit balance or adding the excess amount in the given credit balance. 

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