#1 Bank Reconciliation Statement - Concept -By Saheb Academy - Class 11

hello everyone you're watching saheb Academy if you like our videos then please subscribe to our Channel and also hit the bell again for the regular updates and also follow us on Instagram saheb Academy now let's go to the video hi everyone in this video we're gonna see a new chapter that is called bank reconciliation statement now this chapter BRS it is from financial accounts all right it is from financial accounts and it's a very simple and easy chapter why because there's nothing to do in this chapter you just have to add or subtract that's all that's all you have to do in this chapter you have to prepare a statement and you have to add and subtract that's all but the main thing in this chapter is that the students you know the student they get very much confused in this chapter why because they see there are lots of cases lots of types you know four types are there four cases are there they get very much confused but believe me this is a very simple chapter why because once you understand the logic and the concept behind this chapter right and if you have the basic knowledge of accounting yeah then this chapter is a really piece of cake you know easily you can score full marks out of this chapter so let's understand this chapter and let's finish off this chapter okay that's give me twenty to twenty-five minutes all right so let's start so here is the meaning it is a statement which is prepared to reconcile the causes of difference between bank balance as per cash book and bank balance as per passbook so here according to this meaning we come to know that BRS is what BRS is a statement it is a statement which is prepared to reconcile the causes of difference what difference difference between the cash book and the passbook now what is the meaning of cash book and passbook see cash book means it is a book that is prepared by the business to keep the track of transactions off cash in hand and cash and Bank okay it will have two columns it may have two or three columns also there also me a discount column but we are not concerned about all that okay we are here only concerned upon the bank column okay we are only concerned about the bank column because here we are talking about the bank reconciliation statement so everything related with bank so the cash book cash book is prepared by the businesses to keep the track of the bank and cash transactions or and then the passbook what is the passbook passbook means it is a bank statement it is prepared by the bank to keep the track of the customer's transactions alright ok so now what will happen is there will be a difference between the cash book and the passbook the balance between them see the bank balance how much money is there in the cash book we'll say something else and the bank balance as per passbook will say something else for example let's say on 31st December 2019 the cash book balance ok says that 80,000 rupees is there in the bank account but the passbook the bank statement says the balance is the bank balance is only ninety thousand rupees so you see here there is a difference between these two now why is it happening there are lots of reasons for difference in the cash we can possible okay there are lots of differences okay we'll see that later so what happens is there will be differences in the cash moving the passbook and it is important to reconcile those differences to check those differences okay so to check those differences and everything what we do is we prepare the BRS we prepare the bank reconciliation statement the format is very simple the particulars column will be there and two columns will be there an inner column and an outer column okay that's it so it's a very simple formula you just have to add and subtract we will see but to do the boundary cancellation statement one important thing is that you need to have the complete basic idea behind it okay it's very basic idea all right so you have to have that logic and idea to do the PRS so you need to understand the concept and the logic behind it okay so let's see that alright so this is what BRS is it is prepared to reconcile the differences between the cash book and the passbook alright so let's go ahead now the first thing that I'm going to show you is the modern rules of accounting now you'll be like what modern rules of accounting come on man we know modern rules are accounting we are not kids I knew you know modern rules of accounting but I just want you to revise this okay that's all so let's just do that so what does the modern rules of accounting says it says whenever an asset increases you debit it and whenever an asset decreases what you do you credit yes so this is what modern rules say regarding the as and what does it say regarding a liability whenever the liability increases you credit it and whenever the liability decreases you debit it simple you know this right and then income revenue income revenues also like the liability I mean the rules are like the liability only whenever it increases you credit whenever it decreases you debit same with the capital capitals also like that whenever it increases you credit whenever it decreases you debit an asset and expenses same whenever acid increases debit expense increases debit okay and whenever asset decreases credit and whenever an expense Inc decreases credit but now in bank reconciliation asset and liability concept is very important okay these countries two concepts are very important these two rules are very very important all right so let's go forward now the second thing that you need to understand is the point of view of business as well as the point of view of bank you need to understand both the point of news all right so to do that let's take help of this example okay let's say there is a business all right that's what there's a business and it has opened a bank account and deposited 1 lakh rupees it has deposited 1 lakh rupees now tell me what is this money this one lakh money to the business what is this this is what this is an asset for the business why is it an asset because business deposited that money and it is owned by the business the business has a right to it so it is an asset for the business the business will show on its balance sheet on the asset side cash at bank 1 lakh rupees yes yes fine so it is an asset for the business this money is an asset for the business and the rules regarding the asset whenever the asset increases you debit whenever the bank balance increases you debit from the point of your business I'm talking about all right so whenever the bank balance decreases whenever the a setting decreases new credit simple all right now tell me one more thing what is this money for T Bank is it an asset is it an asset for the bank now Bank has this money in their safe so tell me is it an asset for the bank no it's not an asset for the bank why because bank is just storing the money it is just keeping it it is just safeguarding it for the bad this is not an answer because they don't own it this is the money of the business right the business is what business is a customer of bank isn't it yes because business has opened an account with Bank so business is a customer and business owns that money and the bank is just keeping it so bank for bank this money is what this money is liability you understand it is liability because band doesn't own it but bank is just keeping it so it has to pay it back right whenever the business demands it through ATM or POS or anything demand draft pay order then what bank has to pay it back to the business right or whatever the business say paid to this person like that so a bank has to do that so it is liability for the bank all right it is what it is liability because the bank has to pay that money back to the business simple okay so this is what is meant by the point of view of business and Bank businesses see that money as asset and banks see that money which is deposited with them as liability so deposits are liability to to bank alright simple okay so regarding the rules of liability whenever the liability decreases you debit whenever the liability increases you credit opposite with the asset why is worse okay simple right so bank sees that money as liability and business see that money as asset simple alright and then you need to know what is meant by debited and credited see the meaning of debited and credited changes as the point of view changes from the business point of view from the business point of view when the bank balance and when the bank balance increases when the bank balance increases that means the money has been debited money has been debited alright whenever it increases you know right whenever an asset increases you debit it so that is what I'm saying if the bank balance increases you debit it okay debited it means debited whenever they say in the question they're bitter that means it is increased from the point of your business I'm talking about and credit it means from the point of your business decrease in the bank balance okay decrease in asset and if you see from the point of view of Bank Bank bank that money for Bank is liability right so whenever they saved a better it means decrease their liability is being decreased okay so the bank balance money is decreasing alright if the bank balance money is increasing that means credit okay so credited means bank balance money is increasing now I will give you a simple example for example let's say your friend did GPA to you or a PTM or whatever it is okay and let's say the money directly went to your bank account you will get an SMS right on your register mobile number yes so now what will be the SMS the SMS will be like five thousand money has been credited to your account by SBI or by Axis Bank whatever bang it is alright so now Bank is saying to you that from the point of view of bang that five thousand money has been created you see this creditor that means five thousand has been added to your account it has been increased by five thousand so it has increase in your bank account but the liability of bang is increased now whenever you go to ATM let's say you have already had ten thousand before now your friend paid you $5,000 money is there so now bank has to pay you in ATM fifteen thousand rupees so that is what it means right so from the point of view of bank credit it means increase and debit it means decrease and from the point of your business it's opposite all right because they see it as acid so a debited means increase and credited means decrease now you will be very much clear with this as we solve the problems okay it is very simple I hope you understand it it's very simple okay now let's go forward and then I need to clear about the cash book and the passbook now you know right what is cash book cash book is a book that is prepared by the business the business employee yeah the accountant prepares the cash book so it is from the point of view of business all right so this cash book has double column okay cash column and a bank column now this cash book is prepped to keep the track of the cash transaction cash in hand transaction and cash add bank transaction but here in this chapter we are only talking about bang bang bang so here we are only concerned about the bang column we will ignore the cash column it is not important to us right that is cash available at hand this is cash at bang this is more important to us all right okay so this is cash book it is from the point of view of business and then the bank see Bank prepares a book called as passbook it is a bank statement all right it is regularly sent to the customer that is a business all right so passbook now the passbook is exactly opposite to the cash book why because business treat this 1 lakh as an asset so here whenever that bank balance will increase it will be debited whenever a clinic leases will get credited it is treated as an asset but here in the bank it is treated as a liability so what the passbook and the cash will be exactly it will be opposite why because the rules see whenever the bank - will decrease it will be debited and whenever the bank dollars will get increased it will be credited fine and then one more thing that I need to tell you about is that there will be some items some items that will be recorded in the cash book at a certain point of time I'm talking about okay at a certain point of time what will happen at a certain date there will be difference in the bank balance as for cash book and bank balance as per passbook actually they are supposed to be same they are supposed to be equal alright they are supposed to be equal but what will happen at a certain date they will not be equal the cash book will say in a bank account we have one lakh balance the cash book will say for example it will say we have one lakh balance but the passbook will say no no we have 80,000 balance see there will be difference between what cash book says and what the passbook says there will be difference between the bank balance as per cash book and bank balance as per passbook alright so why this difference happens that is because there are reasons for those differences due to timing differences what will happen some items will appear in the cash book some transaction will appear in the - book and some transaction will not appear in the passbook or some transaction will appear in the passbook and some transaction will not appear in the cash book see here there is reasons for differences between cash book and passbook why the cash book and passbook differs see items appear in cash book items appear in cash book but not in passbook but not in P B but not in but not in passbook see one of those items C check issued now what do you mean my checks issued check issued means we are making a payment okay check issued by business entity not debited by bank that means that means we have given the check to a customer all right not a customer to supplier or write to supplier we are making a payment to supplier for example check issue by business entity to supply and for example and non debited by bank this means that the bank may take two to three days to clear the check all right but when we issued a check immediately we record it in the cash book we have made a payment to a supplier and our bank balance has decreased so the cash book will be decreased ok the bank balance will be decreased but the passbook the passbook will only make the entry after the clearance of the check isn't it after the check is cleared only then they will make the entry right so the bank balance in the passbook will remain the same but in the cash book it will be decreased so this is why like this there will be differences see the next difference is check deposited but not credited by the bank for example the customer paid ask in form of a check so that means check deposited we will take the cheque from the customer and then will go to our bank and we will deposit it that is what is meant by check deposited but not credited by the bank but the band has not cleared it so the amount has not been credited by the bank see if the bank increases the bank ban and that means creditor so bank balance has not been credited by the bank why because it has not yet been cleared so here Chuck deposited so here directly an entry will be recorded in the cash book okay because we have received a payment from a customer we have received the check and have deposited it but Bank has not cleared it not credited by the bank bank has not cleared it that is why that is why the bank balance has remained the same but the cash book balance has been increased okay cash book balance has me increase the bangle has been increased in the cash flow so like this there will be many differences in the cash book in the passbook because of timing differences it takes time to clear the cheque here there was payment here there was a receipt okay we will see this in while solving the question here I am just going through okay then there will be errors there can be errors may be an accountant can record let's say 1500 payment was to be made he recorded it as 2000 or he can record it as 1100 like that okay so there may be errors so due to errors also there will be difference in the cash but in the passbook okay and then standing instruction what is in standing instruction now we can give instruction to the bank that on a certain date please make charity payment to a certain NGO okay so those instruction will be immediately recorded in the passbook when the payment is made but it will not be recorded in the cash flow because the accountant might not remember when that payment was supposed to be made but the passbook will be recorded and the bank balance will be decreased yes when the payment is made the bank balance will get decrease in the passbook but the cash book will remain the same you see so this is how this is how it will happen this is how there will be differences and standing instruction is also included subscription if there is any subscriptions and automatically the payment will get deducted right payment will get deducted and the recording will be made in the past book but the cash book will not be notified or cash book will not be updated so cash book will remain the same and the passbook will differ so anything can happen okay standing instruction is like subscription automation payments okay charity payments we have given the instruction to do automatic payments to the bank okay that is what is meant by standing instruction and then these are the items that appear in C B but not in passbook and then there are items which appear in P B okay which recalls in the P B first but not in the cash book see for example for example C bank interest bank charges for example Bank charge some charges penalties and all ok ATM charges maybe card charges anything so those charges will be recorded first in the passbook yes so the bank balance will get decreased the amount will get debited but the cash book will remain the same here the bank is bank balance is less here the bank bail is more you see so this is how there are so many differences okay then there are direct deposit bill for collection interest and dividend collected by bank so there are lots and lots of reasons for differences arising between the cash within the pause book I hope you have understood by now how the differences arises okay so now we will go forward we will not see all the reasons because we don't have that much of time here now all right so we will go forward okay and we will solve the question in the next video and we'll see how to do that now while solving the BRS problem the main problem is the language now we may not understand some terms and we may make mistakes all right so the first thing that you need to do is when you go on reading the transaction in BRS question then first you need to identify the transaction which is there is it a receipt is the money coming in or money going out it is a receipt or it is a payment that is the most important thing okay to identify whether it is a receipt or payment all right now I'm going to tell you some important terms which is there see deposited now what do you mean by checks deposited see cheques are very much important here because all the questions will have checks in it checks deposited check issue like that so here what do you mean by check deposited see check deposited means we are receiving the cheque from customer or anybody okay any data from any data we are receiving the cheque okay so here for example let's say this is business and this is customer and customer is making payment in form of cheque so now we have got the cheque a paper form a cheque with us and then we will go to the bank our bank and will deposit that check we will do what we will deposit that Chuck okay so that is what is meant by deposited so we'll deposit that check and then what will happen and then it will take two to three days to kill here that cheque okay it may also take a day also all right a day two days three days okay or maybe a week also sometimes delay Mia also happen so so what it will some time to clear the Chuck and then we are going to receive the money in our accounts okay and then the bank will see the bank will send an SMS to you I'm just telling you that they will say the money has been credited to your account why credited because I told you right from the point of view of bank from the point of view of bang when the bank bells increases it is credit ed fine okay so it'll be cleared within 3-4 days and then the money will be added to your account this is what is meant by deposited fine and then check issued or drawn what does it mean check issued or drawn means we are making the payment in form of check that means let's say this is a business this is a supplier let's say we are supposed to pay five thousand rupees to this supplier so we are making a payment in form of cheque we are tearing of the slip of cheque all right and you're writing the suppliers name and everything and then we are giving the cheque to the supplier of after signing and everything you're giving the cheque to the supplier and then the supplier takes it to his bank and then it takes certain days two to three days to clear that cheque and then what will happen and then and then the money will be deducted from our account right five thousand rupees will be deducted from our account the money will get debited why debated because according to the bank according to the bank I'm talking about according to the bank bank balance will reduce right if it reduces if it reduces then debit okay debit fine so it we debited write the bank balance will be decreased by five thousand so here by here you can no see here directly we received the check yes we receive the check from the customer so immediately we will record it in the cash book we will do what we will immediately record it in the cash book we have received the check right our bank balance should increase then after depositing I'm talking about after depositing will immediately recorded in the cash book the business will record it in the cash book that our bank balance has been increased okay but it will take certain days to clear it it will take certain days to clear the check and then only the bank balance will be updated our bank balance will be increased by whatever the amount that customer paid to us yes so it takes some time to kill your the check that is why there will be difference between the - bookend the possible this is a practical example and giving you here alright and then in case of the payment see for example we made a payment business made pay payment to the S supplier right so the check was issued nah we have given the check to the supplier so immediately we recorded in the cash book that the hour accounted recording the cash with that we have made payment to the supplier right so our bank balance has been decreased our bank balance has been decreased by five thousand in that example I'm talking about our bank balance has been decreased by five thousand but our bank balance will remain the same until and unless the check is cleared right I'm clear unless cheque is cleared which will take three to four days or two to three days right and what if the S never presented the cheque within like a week or so then the balance will still remain the same it will not get to get deducted because the supplier has three months for the cheque to go still the cheque to expire you know that right check expires after the three months of the due date so S has three months to clear that cheque so s can take that check to the bank within the three months let's say he took the check to the bank after a month maybe he was he went outside somewhere okay so that can happen so this is why this is why there will be different between the cash book and the past why because of the timing differences it takes time to kill your the check okay whether it is a receipt or payment there will be difference all right there will be difference between the cash book and the passbook because of the delay in clearing the checks and all all right so it will be recorded in the passbook after the clearance only by the bank all right but in the cash book the interest will be made immediately okay from the point of view of business so this is how the language is there receipt means deposited I mean deposited means recede and issued means payment okay drawn also means payment check drawn check issued means payment and check deposited means receive so you need to understand the language of the banking and this is also very important debited means according to bank that the balance is being reduced and credited means balance is increased and in the case of business from the point of your business debited means cash has been increased and credited means cash has been bank balance has been decreased fine so you need to understand these terms okay this language this banking language only then you can easily prepare the VRS now finally here we have the format of Bhangra cancellation statement VRS Bhangra consideration statement of ABC company as on 31st December 2019 so here the date will come and then there will be three columns particulars column and inner column and an outer column fine and then depending upon the question you have to take the balance balance as per cash book if cash book balance is given if the passbook balance is given take the passbook balance okay it depends upon the caution so balances per cash book so you have to take it directly into the outer column and then according to the technique and the logic that we are going to see you have to add certain transaction and you have to less certain transaction you have to subtract certain transaction okay so let's say here that there is 10000 and let's say here there is 2000 all this is 2000 so let's see two hundred two hundred one thousand seven hundred and one hundred okay so this is equal to 2000 so 2000 will you come outside alright so ten thousand plus 2000 that is equal to twelve thousand yeah and let's say all this is how much all this is let's say three thousand how much three thousand so this three thousand will come outside okay three thousand the sum of these three will come outside let's say one one one three thousand so the hammer it was twelve thousand - three thousand that is equal to nine thousand so after doing this if you have chosen if you have been given balances per cash book then you will arrive at balance as per pass book if you have been given balances per pass book then you will arrive at balance as put cash book alright so this is how you need to do it is very simple okay we have already understood the logic and the concept behind it just the trick and the little idea is left that we are going to see the technique alright and one more thing there are types there are four types in this see there is balance as per cash book how to do when balances for cash book is given how to do when balances per pass book is given and how to do when overdraft is given an overdraft as per passbook overdraft aspart cash book now what is old raft see Oh draft means the band will give the businesses in current account who has current account they will give the facility of withdrawing more than what they have in their bank account for example if you have a business and you're a business owner and let's say you have a current account and you can withdraw even if there is zero balance in your bank account in your current account if you have zero icon you can still withdraw ten thousand depending upon the facility okay so you can draw and it'll be interest on it okay okay that's apart so here or draft aspart passbook and overdraft as per casual for order of can also happen okay and order of can also be given in the question so so there are four cases in this in this chapter but don't worry it is very simple see most of the student think there are four cases and the accounting treatment is also for cases no no no it's very simple there are only two cases see balance as per cash book treatment accounting treatment and overdraft as per passbook treatment is same same and trial thing is same this and this is same ok the treatment how to solve is entirely same ok and balances for passbook and overdraft as per cache which is also exactly same ok don't worry it's exactly same we will solve this problem in the next video and you will see how easy this is ok so it is very simple balance for cash book and order of s purpose bussiness balance and overdraft opposite cash book and passbook opposite ok this is same and here also balance order opposite passbook cash book opposite so this is sin okay it is same we will see this fine so if you start with overdraft as per cash book then you will arrive at or draft as per passbook if you start with order of as per passbook you will arrive at overdraft as per cash book fine it is very simple we will see this in the next video alright so this is just the format and we have seen the concern and everything and the last thing that is remaining is the technique what we have to do see the technique is very simple first thing that you need to do when you get a question of VRS I didn't define what you have been given whether you have been given the balance for cash book order office for possible balance for passbook order of expert cash book which balance or which order of you have been given that we need to identify it will be at the top or at the bottom of your question okay so first you need to identify that because with that only you will start the question fine your I mean the solution with that only you will start the solution and then what you need to do we will see this practically in the next video okay you have to assign the left finger as CB you have to write on your fingers CB and here you have to write PB okay and then you need to make it power like that okay see if one has been in clear has been decreased like that you have to make okay we will see that now we are out of time and then you have to keep on checking the transaction okay keep on checking the transaction how the transactions are affecting the cash book and the passbook okay something will happen something will be recorded in the cash book so let's say cash book will be more cash book will be more and the possibility then you have to modify you have to change so you can make changes in the book which you have been given if you have been given balance as per cash book then you can only change the cash book now what did I tell you this is the cash book finger and this is the passbook finger fine so if the cash book is more and you have been given cash work in in one transaction let's say cash book is more okay cash book has been recorded more then you need to make changes in the cash book only okay you need to bring cash book down like that so we will see that later I'm just going through right now so this is a technique it's very simple it's very simple we will solve as some in the next video all right so please watch the next video in this video we have seen the complete concept and everything if you haven't understood then please rewatch that portion of the video alright so this is the technique and this is the format and we prepare the BR a statement to reconcile the cash book and the passbook alright okay

Channel: Saheb Academy

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Keywords: bank reconciliation statement, brs, 11th, 12th, financial accounting, bank reconciliation statement in hindi, bank reconciliation statement in english, statement, hindi, telegu, malyalam, double entry, ncert, ts grewal, commerce, degree 1st year, ca inter, m.saheb, saheb academy, saheb, bba, cbse, icse, 11th accounts, accountancy, cashbook, passbook, as per, overdraft, cheques, bills, ashram college, convent, st joseph college, dharwad college, bangalore college, cpa, acca, debit, credit, cma

Id: _RfayQTf5zU

Length: 30min 37sec (1837 seconds)

Published: Tue Jul 30 2019