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Bank Reconciliation Statement – Class 11 Accountancy notes, important questions and MCQs

NCERT Class 11 Accountancy, chapter 5. Notes, key terms, important questions with answers and MCQs.

Chapter overview

A business records its bank transactions in the bank column of the cash book, while the bank records them in the pass book (bank statement). The balances often differ because of timing differences and errors. A bank reconciliation statement explains these differences and helps detect errors and fraud.

Causes of difference

Cheques issued but not yet presented for payment: cash book shows less balance than the pass book.
Cheques deposited but not yet collected (credited) by the bank: cash book shows more.
Bank charges and interest on overdraft debited by the bank but not yet recorded in the cash book.
Interest credited, dividends collected and direct deposits by customers recorded by the bank but not yet in the cash book.
Errors made by the business or by the bank.

Preparing the statement

Start with the balance as per cash book (or pass book).
Add items that make the other balance higher, and subtract items that make it lower.
A debit balance in the cash book (bank column) is a favourable balance; a credit balance is an overdraft.
The final figure must equal the balance as per the other book.

Importance

It identifies reasons for differences and helps correct errors.
It discourages fraud by employees and helps keep the cash book up to date.

Key terms

Pass book: the copy of a customer's account maintained by the bank
Bank reconciliation statement: a statement that explains the differences between the cash book and pass book balances
Overdraft: a balance where the customer has withdrawn more than the deposit, shown as a credit balance in the cash book
Unpresented cheque: a cheque issued by the business that the payee has not yet presented to the bank
Uncleared cheque: a cheque deposited by the business that the bank has not yet credited

Important questions with answers

Why do the cash book and pass book balances differ?2 marks

The balances differ because of timing differences and errors. For example, cheques issued may not yet be presented, cheques deposited may not yet be credited, the bank may have charged fees or credited interest not yet recorded in the cash book, customers may have deposited money directly, and either party may have made errors.

What is the importance of a bank reconciliation statement?3 marks

A bank reconciliation statement explains why the cash book and pass book balances differ, helps detect and correct errors in either record, brings to notice unrecorded bank charges, interest and direct deposits, discourages fraud and misappropriation by employees, and confirms the correct bank balance for the balance sheet.

Prepare a bank reconciliation statement: cash book balance ₹10,000 (debit); cheques issued but not presented ₹2,000; cheques deposited but not credited ₹1,500; bank charges ₹100 not in cash book; interest credited by bank ₹300 not in cash book. Explain each step.5 marks

We start with the balance as per cash book, a favourable balance of ₹10,000. Cheques issued but not presented, ₹2,000, have been deducted in the cash book but not yet by the bank, so the pass book balance is higher; add ₹2,000. Cheques deposited but not credited, ₹1,500, have been added in the cash book but not yet by the bank, so the pass book balance is lower; less ₹1,500. Bank charges of ₹100 have been debited by the bank but not recorded in the cash book, so the pass book balance is lower; less ₹100. Interest of ₹300 has been credited by the bank but not recorded in the cash book, so the pass book balance is higher; add ₹300. Calculation: ₹10,000 + ₹2,000 + ₹300 = ₹12,300; less ₹1,500 + ₹100 = ₹1,600; balance as per pass book = ₹12,300 − ₹1,600 = ₹10,700. The statement thus shows that the pass book has a favourable balance of ₹10,700 and explains each difference.

Quick revision

Cash book bank column vs pass book.
Timing differences and errors.
Unpresented cheques: add to cash book balance; uncleared cheques: subtract.
Bank charges: subtract; interest credited: add (starting from cash book balance).

Exam tips

For every item, ask which book has already recorded it and whether that book's balance is higher or lower.
Write 'Add' and 'Less' clearly and draw a final line showing the other book's balance.

Practice MCQs

The bank's record of a customer's account is the
1. cash book
2. journal
3. ledger
4. pass book
Show answer
Answer: (d) pass book. It is also called the bank statement.
A statement explaining the difference between cash book and pass book balances is a
1. trial balance
2. balance sheet
3. bank reconciliation statement
4. cash flow statement
Show answer
Answer: (c) bank reconciliation statement. It reconciles the two.
A credit balance in the bank column of the cash book indicates
1. favourable balance
2. cash in hand
3. overdraft
4. profit
Show answer
Answer: (c) overdraft. More has been withdrawn than deposited.
Starting from a favourable cash book balance, cheques issued but not presented are
1. subtracted
2. added
3. ignored
4. doubled
Show answer
Answer: (b) added. The pass book has not yet reduced the balance.
Starting from a favourable cash book balance, bank charges not recorded in the cash book are
1. added
2. ignored
3. subtracted
4. shown as income
Show answer
Answer: (c) subtracted. The pass book already shows a lower balance.
Cheques deposited but not credited by the bank make the
1. cash book balance higher
2. pass book balance higher
3. both balances equal
4. overdraft larger in the cash book
Show answer
Answer: (a) cash book balance higher. The cash book has already recorded them.
Cash book balance is ₹10,000. Cheques issued not presented ₹2,000; cheques deposited not credited ₹1,500. The pass book balance is
1. ₹10,500
2. ₹9,500
3. ₹13,500
4. ₹8,500
Show answer
Answer: (a) ₹10,500. 10,000 + 2,000 − 1,500.
Interest credited by the bank, not yet in the cash book, starting from the cash book balance, is
1. subtracted
2. recorded as expense
3. ignored
4. added
Show answer
Answer: (d) added. The pass book balance is higher.

All chapters of Class 11 Accountancy

Written by Kundali IQ from standard, well-established facts to help with revision. This is not an official NCERT publication; always read your textbook too.