Reconciling favourable balances

A BRS starts from one balance (the cash book or the passbook) and adjusts it, item by item, until it reaches the other balance.

For each item, ask two questions: which book has recorded it, and which has not? Then: does it make the other book's balance higher or lower? Move the starting figure in that direction.

Starting from the cash book:

• Add cheques issued but not yet presented (the bank has not paid them yet, so the passbook is higher).
• Add interest and dividends collected by the bank, and amounts paid directly into the account.
• Less cheques deposited but not yet credited (you counted them; the bank has not).
• Less bank charges, payments made by the bank on standing instructions, and dishonoured cheques.

Starting from the passbook, every item is treated the other way round. You can start from either book; there is no rule that it must be the cash book.

A worked example. Alpha Ltd's cash book shows ₹1,54,300 on 31 March. Less cheques deposited but not cleared ₹75,450; add cheques issued but not presented ₹80,760; less bank charges ₹1,135; add a debtor's cheque paid straight into the bank ₹1,35,200; less an insurance premium paid by the bank ₹15,400; add dividend collected ₹1,000. The result is ₹2,79,275, exactly the passbook balance.

From the book: Mr. Vinod, 50,000 + 6,000 + 8,000 − 6,000 − 400 = ₹57,600 as per passbook. Boss & Co., starting from the passbook: 45,000 + 6,250 + 2,500 − 25,940 = ₹27,810 as per cash book.