Bank Reconciliation Statement From Pass Book Balance

Bank Reconciliation Statement becomes much easier when you know your starting point.

Many students understand the meaning of cash book and pass book, but still make mistakes because they do not notice one small phrase in the question:

Balance as per pass book

This phrase changes the direction of the whole answer.

You are not starting from the business record. You are starting from the bank’s record and trying to reach the cash book balance.

That means you must think like this:

What has the pass book already shown? What has the cash book already shown? What should be added or deducted so that the bank’s balance turns into the business’s balance?

Once this direction is clear, Bank Reconciliation Statement feels much more logical.

First, Understand the Two Books

The cash book is maintained by the business. The bank column of the cash book records money deposited into the bank and money paid out of the bank.

The pass book, or bank statement, is maintained by the bank. It shows the same bank account from the bank’s records.

In simple words:

Book	Maintained by	What it shows
Cash book	Business	Bank transactions recorded by the business
Pass book	Bank	Bank transactions recorded by the bank

Both records are about the same bank account, so the balances should match. But in real life, they often do not match on a particular date.

This happens because one side may record a transaction before the other side.

For example, the business may record a cheque deposited today, but the bank may credit it only after clearing. Or the bank may deduct bank charges before the business enters them in the cash book.

Bank Reconciliation Statement explains these differences.

What Does Starting With Pass Book Balance Mean?

If the question says “balance as per pass book”, it is giving you the balance according to the bank.

Your job is to adjust that balance and find the balance according to the cash book.

So the direction is:

Pass book balance -> Cash book balance

This direction matters because the same item may be added when you start with pass book, but deducted when you start with cash book.

For example, take bank charges.

Bank charges are usually recorded by the bank first. The pass book has already reduced the balance. The cash book may not have recorded the charge yet.

So if you start with pass book balance and want to reach cash book balance, you add bank charges back.

Why?

Because the cash book is still showing a higher balance until the business records those charges.

This is the heart of the chapter.

The Best Question to Ask for Every Item

Do not begin by asking, “Should I add this or deduct this?”

Begin with this:

Which book has already recorded this item?

Then ask:

What would the cash book balance look like compared with the pass book balance?

That two-step thinking prevents most sign mistakes.

If the item is already in the cash book but not yet in the pass book, you adjust the pass book to match the cash book.

If the item is already in the pass book but not yet in the cash book, you reverse the pass book’s effect because the cash book has not yet recorded it.

That one line keeps your direction clear.

The Simple Rule for Pass Book Starting Point

Here is the cleanest way to remember the logic.

1. Cash book has recorded it, pass book has not

In this case, the cash book has already changed, but the pass book has not changed yet.

So you adjust the pass book in the same direction as the cash book effect.

Situation	Effect in cash book	Starting from pass book
Cheque deposited but not credited by bank	Cash book is higher	Add
Cheque issued but not presented for payment	Cash book is lower	Deduct

2. Pass book has recorded it, cash book has not

In this case, the pass book has changed, but the cash book has not changed yet.

So you reverse the pass book’s effect to reach the cash book.

Situation	Effect in pass book	Starting from pass book
Bank charges entered in pass book only	Pass book is lower	Add
Interest allowed by bank entered in pass book only	Pass book is higher	Deduct
Direct deposit by customer entered in pass book only	Pass book is higher	Deduct
Standing instruction paid by bank entered in pass book only	Pass book is lower	Add

This table is not meant for blind memorisation. It is meant to show the story behind each entry.

That is the main pass-book-starting logic.

Cheques Deposited but Not Yet Credited

This is one of the most common items.

The business receives a cheque from a customer and deposits it into the bank. The business records the deposit in the cash book.

But the bank has not cleared the cheque yet, so the pass book does not show the credit.

Now compare both books:

• cash book has increased
• pass book has not increased

So the cash book balance is higher than the pass book balance.

If you start with pass book balance, you add cheques deposited but not credited.

The phrase may also appear as “cheques deposited but not collected”, “cheques sent to bank but not credited”, or “cheques paid into bank but not cleared”.

The meaning is the same: cash book has recorded the receipt, pass book has not.

Cheques Issued but Not Yet Presented

Now think about cheques issued by the business.

When the business issues a cheque, it records the payment in the cash book. The cash book balance reduces.

But the person receiving the cheque may not present it to the bank immediately. Until the bank pays the cheque, the pass book does not show the reduction.

Now compare both books:

• cash book has decreased
• pass book has not decreased

So the cash book balance is lower than the pass book balance.

If you start with pass book balance, you deduct cheques issued but not presented.

This one picture makes the treatment easier to remember.

Bank Charges, Interest Charged, and Direct Payments

Some items are recorded by the bank first.

These include:

• bank charges
• cheque book charges
• interest on overdraft
• insurance premium paid by bank
• rent, subscription, or loan instalment paid under standing instructions
• bills payable paid directly by bank

In all these cases, the bank has reduced the pass book balance.

But if the business has not yet entered the item in the cash book, the cash book balance is still higher.

So when you start with pass book balance, you add these items.

Item	Recorded first in	What happened to pass book?	Starting from pass book
Bank charges	Pass book	Reduced	Add
Interest on overdraft	Pass book	Reduced	Add
Insurance paid by bank	Pass book	Reduced	Add
Standing instruction payment	Pass book	Reduced	Add

This often feels opposite to what students expect. They see “charges” and think “deduct”. But remember, you are already starting from the reduced pass book balance. To reach the cash book, which has not yet recorded the deduction, you add it back.

Interest Credited, Direct Deposits, and Collections by Bank

Now take items that increase the pass book before the cash book knows about them.

These include:

• interest credited by bank
• dividend collected by bank
• customer directly depositing money into the bank account
• bills receivable collected by the bank
• any income credited directly by bank

In all these cases, the bank has increased the pass book balance.

But if the business has not yet entered the item in the cash book, the cash book balance is still lower.

So when you start with pass book balance, you deduct these items.

Item	Recorded first in	What happened to pass book?	Starting from pass book
Interest credited by bank	Pass book	Increased	Deduct
Direct deposit by customer	Pass book	Increased	Deduct
Dividend collected by bank	Pass book	Increased	Deduct
Bill collected by bank	Pass book	Increased	Deduct

Always read the wording carefully.

A Quick Add and Deduct Table

When the starting point is a normal favourable balance as per pass book, this table helps:

Reconciliation item	Treatment
Cheques deposited but not credited by bank	Add
Cheques issued but not presented for payment	Deduct
Bank charges not entered in cash book	Add
Interest on overdraft charged by bank but not entered in cash book	Add
Direct payment by bank not entered in cash book	Add
Interest credited by bank but not entered in cash book	Deduct
Direct deposit by customer not entered in cash book	Deduct
Dividend collected by bank not entered in cash book	Deduct
Bill collected by bank not entered in cash book	Deduct
Amount wrongly debited by bank	Add
Amount wrongly credited by bank	Deduct

Use the table after understanding the logic, not before.

If you memorise it without understanding, one slightly different question can still confuse you.

Format When Starting With Pass Book Balance

A simple format looks like this:

Particulars	Plus (Rs.)	Minus (Rs.)
Balance as per pass book	Amount
Add items that make cash book higher	Amount
Less items that make cash book lower		Amount
Balance as per cash book		Amount

Some teachers prefer a direct add-deduct format:

Balance as per pass book
Add: Items to be added
Less: Items to be deducted
Balance as per cash book

Both styles are based on the same logic. Use the format expected in your class.

Most BRS mistakes happen because students rush the placement of the first two items.

Solved Example: Starting With Pass Book Balance

Prepare a Bank Reconciliation Statement from the following information:

Balance as per pass book: Rs. 70,700
Cheques deposited but not yet credited: Rs. 8,900
Cheques issued but not yet presented: Rs. 12,500
Dividend collected by bank but not entered in cash book: Rs. 5,000
Bank charges not entered in cash book: Rs. 400

First understand each item.

Cheques deposited but not credited are already in the cash book, but not in the pass book. Cash book is higher, so add Rs. 8,900.

Cheques issued but not presented are already deducted in the cash book, but not in the pass book. Cash book is lower, so deduct Rs. 12,500.

Dividend collected by bank is already added in the pass book, but not in the cash book. Cash book is lower, so deduct Rs. 5,000.

Bank charges are already deducted in the pass book, but not in the cash book. Cash book is higher, so add Rs. 400.

Now prepare the statement:

Particulars	Plus (Rs.)	Minus (Rs.)
Balance as per pass book	70,700
Cheques deposited but not yet credited	8,900
Bank charges not entered in cash book	400
Cheques issued but not yet presented		12,500
Dividend collected by bank but not entered in cash book		5,000
Balance as per cash book		62,500
Total	80,000	80,000

So the balance as per cash book is Rs. 62,500.

Notice how the answer becomes easy when you explain the reason before writing the amount.

Another Mini Example

Suppose balance as per pass book is Rs. 18,000.

The bank has credited interest of Rs. 600, but it is not entered in the cash book.

Starting from pass book balance:

Pass book balance = Rs. 18,000
Less: Interest credited by bank but not entered in cash book = Rs. 600
Cash book balance = Rs. 17,400

Why deduct?

Because the pass book has already increased by Rs. 600, but the cash book has not. To reach the cash book balance, remove that increase.

Now suppose bank charges of Rs. 250 are not entered in the cash book.

Starting from pass book balance:

Pass book balance = Rs. 18,000
Add: Bank charges not entered in cash book = Rs. 250
Cash book balance = Rs. 18,250

Why add?

Because the pass book has already decreased by Rs. 250, but the cash book has not. To reach the cash book balance, reverse that decrease.

Be Careful With Overdraft

An overdraft means the bank account has a negative balance. The business owes money to the bank.

If the question says “overdraft as per pass book”, do not treat it like a normal favourable balance.

A normal pass book balance means money available in the bank. An overdraft means the opposite.

For overdraft questions, it helps to put a minus sign in rough work.

For example:

Overdraft as per pass book = -20,000

Then apply the item logically. If an item would increase a normal balance, it reduces the overdraft. If an item would reduce a normal balance, it increases the overdraft.

If you are still learning the chapter, master normal pass book balance first. Then practise overdraft separately.

Common Mistakes When Starting With Pass Book

The first mistake is using the cash-book-starting rule by habit. If you recently solved a question starting with cash book balance, your mind may continue the same pattern. Stop and check the starting point again.

The second mistake is treating bank charges as a deduction. Bank charges reduce the pass book first. If the cash book has not recorded them, add them while starting from pass book.

The third mistake is treating direct deposits as additions. A direct deposit increases the pass book first. If the cash book has not recorded it, deduct it while starting from pass book.

The fourth mistake is ignoring words like “not entered in cash book”, “not credited by bank”, “not presented for payment”, and “collected by bank”. These words tell you which book has already recorded the item.

The fifth mistake is rushing errors. If the bank has wrongly debited the account, the pass book is lower than it should be, so add it. If the bank has wrongly credited the account, the pass book is higher than it should be, so deduct it.

This small marking habit makes long questions much safer.

A Practice Method That Actually Works

Do not practise BRS by copying answer tables.

Practise it by explaining one line at a time.

For every item, write:

Item:
Recorded in:
Effect on that book:
Starting from pass book, treatment:
Reason:

For example:

Item: Bank charges Rs. 300
Recorded in: Pass book
Effect on that book: Pass book reduced
Starting from pass book, treatment: Add
Reason: Cash book has not reduced yet

After doing this for ten questions, the pattern becomes natural.

You will stop asking, “Is this item always added?” and start asking, “Which record has already changed?”

That is the correct Accountancy thinking.

Final Thought

Bank Reconciliation Statement is not a chapter of random plus and minus signs.

It is a chapter about comparing two records with patience.

When the question starts with pass book balance, remember your direction:

Bank's record -> Business record

If the pass book has already reduced the balance and the cash book has not, add it back.

If the pass book has already increased the balance and the cash book has not, deduct it.

If the cash book has recorded something and the pass book has not, adjust the pass book so it reaches the cash book.

Once you can explain the reason behind every amount, the format becomes much easier.

Frequently Asked Questions

What is a Bank Reconciliation Statement?

A Bank Reconciliation Statement explains why the cash book balance and pass book balance are different on a particular date.

What does balance as per pass book mean?

It means the starting balance is taken from the bank’s record. From that balance, you make adjustments to find the cash book balance.

When starting with pass book balance, are bank charges added or deducted?

Bank charges are added if they are entered in the pass book but not yet entered in the cash book. The pass book has already reduced the balance, so you add them back to reach the cash book balance.

When starting with pass book balance, how are cheques deposited but not credited treated?

They are added. The cash book has already recorded the deposit, but the pass book has not credited it yet, so the cash book balance is higher.

When starting with pass book balance, how are cheques issued but not presented treated?

They are deducted. The cash book has already recorded the payment, but the pass book has not reduced the balance yet, so the cash book balance is lower.

Why are direct deposits deducted when starting with pass book balance?

Direct deposits are deducted when they are entered in the pass book but not yet entered in the cash book. The pass book has already increased, so you remove that increase to reach the cash book.

How can I avoid add and deduct mistakes in BRS?

First identify the starting balance. Then ask which book has already recorded the item and whether that book’s balance became higher or lower. Do this before writing the amount in the statement.

Is overdraft treated the same way as a normal pass book balance?

The story behind each item is the same, but overdraft is a negative balance. It is better to mark overdraft with a minus sign in rough work and practise those questions separately after learning normal balance questions.