What is a Bank Reconciliation Statement and Why Does It Matter?
The Bank Reconciliation Statement (BRS) is a key concept in Accountancy Class 11 Chapter 5. It helps students understand the reasons behind differences between their cash book and bank statement. Mastering BRS is not only essential for scoring in school exams but is also valuable for competitive tests and practical business operations.
| Term | Meaning | How It Affects BRS |
|---|---|---|
| Unpresented Cheque | Cheque issued but not yet presented in bank | Added to pass book balance |
| Uncredited Deposit | Cheque deposited but not cleared by bank | Deducted from pass book balance |
| Dishonored Cheque | Cheque not accepted by bank | Deducted from cash book |
| Bank Charges | Fees charged by bank | Deducted from pass book balance |
| Direct Deposit | Deposit made directly in the bank by a third party | Added to pass book balance |
What is Bank Reconciliation Statement?
A bank reconciliation statement is a document that matches the balance shown in an organisation’s cash book with the balance on its bank statement, highlighting any differences. Students learn this topic in Accountancy Class 11 Chapter 5 to identify reasons like uncredited cheques, bank errors, or direct deposits, which commonly cause mismatches.
Importance of Bank Reconciliation Statement in Exams and Business
Understanding the bank reconciliation statement equips students for questions in school and competitive exams like CBSE, SSC, and entrance tests. In real-world business, a BRS helps detect errors, prevent fraud, and manage cash flows accurately. Practicing this concept enables better analytical and problem-solving skills.
Types of Differences in Bank Reconciliation
- Cheques issued but not presented
- Cheques deposited but not yet credited
- Bank charges or interest entered by the bank directly
- Direct deposits by third parties
- Dishonored or returned cheques
MCQs for Accountancy Class 11 Chapter 5: Bank Reconciliation Statement
- A bank reconciliation statement is prepared by:
- (a) Account holder in a bank
- (b) Bank
- (c) Creditors
- (d) Debtors
- A bank reconciliation statement compares a bank statement with:
- (a) Cash payment journal
- (b) Cash receipt journal
- (c) Cash book
- (d) Financial statements
- Which of the following would not affect bank reconciliation?
- (a) Discount received
- (b) Dishonored cheque
- (c) Bank interest
- (d) Cheque not presented
- What is the main purpose of preparing a bank reconciliation statement?
- (a) To know the bank balance
- (b) To identify causes of difference between cash book and bank statement
- (c) To correct the cash book
- (d) To know the balance of bank statement
- XYZ Ltd. receives a cheque for Rs. 500, records it in the cash book, and deposits it on the same day. The bank statement that day does not show this Rs. 500. How is this shown in the BRS?
- (a) As an unpresented cheque added to the bank balance
- (b) As an uncredited deposit deducted from the bank balance
- (c) As an uncredited deposit added to the bank balance
- (d) As an unpresented cheque deducted from the bank balance
- The balance on the debit side of the bank column of the cash book indicates:
- (a) The total amount drawn from the bank
- (b) The total overdraft in the bank
- (c) Cash at bank
- (d) None of the above
| Question | Correct Option | Short Explanation |
|---|---|---|
| 1 | (a) | BRS is prepared by the account holder, not the bank. |
| 2 | (c) | It compares cash book with bank statement. |
| 3 | (a) | Discounts received do not cause cash-book/pass-book differences. |
| 4 | (b) | Main aim is to identify reasons for differences. |
| 5 | (c) | An uncredited deposit is shown as added to the bank statement balance. |
| 6 | (c) | Debit side of bank column means cash the business has in the bank. |
Bank Reconciliation Statement: Real-World Example
Suppose a company issues a cheque to a supplier at the end of the month. The amount is deducted from its cash book immediately, but the cheque may not be presented to the bank until the next month. This leads to a timing difference, which is reconciled in the bank reconciliation statement. Such practical situations reinforce why knowing BRS is essential for businesses and exams alike.
Case Scenario MCQ Example
A firm’s cash book shows a bank balance of Rs. 20,000, while the pass book shows Rs. 19,800. Bank charges of Rs. 200 were debited by the bank, but not entered in the cash book. In the BRS, this amount will be deducted from the cash book balance to match the pass book.
How to Prepare a Bank Reconciliation Statement
- Start with the cash book or pass book balance as given.
- List items causing differences (uncredited cheques, unpresented cheques, bank charges, etc.).
- Add or deduct these items as needed to reach the adjusted balance.
Important Internal Links for Further Study
- DK Goel Solutions Class 11 Accountancy Chapter 5
- TS Grewal Solutions Class 11 Accountancy Chapter 5
- Ledger Accounts
- Types of Errors
- Bank Reconciliation
- Trial Balance
- Suspense Account
- Types of Accounts
Why Vedantu for Accountancy Class 11?
At Vedantu, we simplify Commerce topics like the bank reconciliation statement for easy learning. With clear explanations, exam-oriented MCQs, and detailed solutions, students can prepare effectively for Class 11 exams and beyond.
In summary, mastering the Bank Reconciliation Statement in Accountancy Class 11 Chapter 5 helps students clear their fundamental concepts, boosts exam performance, and builds essential skills for future accounting roles. Regular practice ensures accuracy in financial records and success in both exams and business accounting.
FAQs on Accountancy Class 11 Chapter 5: MCQ Practice on Bank Reconciliation Statement
1. What is a Bank Reconciliation Statement in Accountancy?
A bank reconciliation statement compares your company's cash book balance with its bank statement balance to identify discrepancies. It helps ensure accurate financial reporting.
2. Why do cash book and pass book balances differ?
Differences between cash book and pass book balances arise from transactions recorded in one but not the other. These include:
- Outstanding cheques (written but not yet cashed)
- Deposits in transit (deposited but not yet reflected in the bank statement)
- Bank charges (fees deducted by the bank)
- Direct debits/credits (transactions directly debited or credited by the bank)
- Errors in either the cash book or bank statement.
3. Who is responsible for preparing the bank reconciliation statement?
The responsibility for preparing a bank reconciliation statement typically falls on an accountant or bookkeeper within a company. This ensures accurate financial record-keeping and helps identify potential discrepancies.
4. How is a dishonored cheque reflected in a bank reconciliation?
A dishonored cheque (a cheque that bounces) reduces the bank statement balance but is not immediately reflected in the cash book. The difference is reconciled by deducting the dishonored cheque amount from the cash book balance in the reconciliation statement.
5. Where can I find MCQ questions with answers for Accountancy Chapter 5?
You can find MCQ questions with answers for Accountancy Chapter 5 (Bank Reconciliation Statement) in various resources, including textbooks, online study platforms, and revision guides. Look for materials specifically aligned with the CBSE syllabus.
6. What is a bank reconciliation statement?
A bank reconciliation statement matches your company’s cash book balance to its bank statement balance. It identifies discrepancies caused by outstanding cheques, bank charges, or errors.
7. Why do balance differences occur in cash book and pass book?
Differences happen due to timing lags in recording transactions. The cash book reflects your transactions, while the pass book shows the bank's records. Unpresented cheques, deposits in transit, and bank charges create differences.
8. How is a dishonored cheque treated in bank reconciliation?
A dishonored cheque (returned unpaid) is subtracted from the cash book balance during bank reconciliation because it’s recorded in the cash book but not yet in the bank statement.
9. When should you prepare a bank reconciliation statement?
Regularly prepare a bank reconciliation statement—monthly is ideal—to catch discrepancies early. This allows for prompt investigation and correction of errors. It’s a crucial part of maintaining accurate financial records.
10. What are the common mistakes students make when solving BRS questions in exams?
Common mistakes include misinterpreting transaction types (like outstanding cheques or deposits in transit), incorrectly calculating the adjusted balance, and failing to account for all differences between the cash book and bank statement. Carefully review each transaction.
11. How can regular reconciliation prevent fraud in business accounts?
Regular bank reconciliation is a crucial internal control measure. By regularly comparing the cash book and bank statement, discrepancies are promptly identified, which can indicate fraudulent activity. This allows for timely intervention and prevention of potential financial losses.
