Preparation of Specimen BRS

A bank reconciliation statement, or BRS, is something that almost everyone has seen. BRS is an accounting term that refers to a document that is issued on a specific date for the purpose of reconciling the bank balance with the Cash Book or Pass Book. The bank statement also includes explanations for the discrepancies between the Cash Book and the Pass Book. Let’s take a look at some of the issues surrounding BR’s preparation. Any business’s accountant can also generate a Bank Reconciliation statement. The goal of a bank reconciliation statement is to compare the bank’s records with the corporate records of any business. It’s done once a month, when the bank statement arrives.

Importance of  Preparing  BRS 

1.Customers can use a BRS to find out what their final bank balance is.

2.It prohibits bank employees from defrauding customers.

3.It explains the distinctions between a Passbook and a Cash Book to the clients.

4.BRS aids in identifying any unanticipated delays in the cheque clearance procedure.

5.The BRS will reflect any fraudulent activity or difficulties involving bank transactions.

In the accounting book, all income or expenditures transacted by the bank will be shown in the BRS.

Different ways of preparation Of BRS

Now that you’ve grasped the importance of preparing BRS, it’s time to learn how it’s done. In general, there are two methods for preparing BRS that have been confirmed to work. 

1.Rules for Subtraction and Addition

2 Methods of Payment: Credit and Debit

Important Factors to Consider When Preparing a Bank Reconciliation Statement

Beginning with the bank passbook balance or, in certain cases, the Cash Book balance, a Bank Reconciliation Statement is prepared.

If the remaining balance of the Cash Book is used as a starting point, the Cash Book balance must be modified in accordance with the book entries that are passed in the bank’s passbook, and vice versa.

For instance, if the balance is calculated according to the Cash Book, the following elements will be added:

• Cheques that had been issued previously but had not been submitted for payment on time
• The amount credited in the Passbook but not indicated in the Cashbook entries
• Deposits that were made directly into the bank without any complications
• In any situation, the bank’s credit information is incorrect
• After then, the interest is credited to the Passbook

The following items will be deducted from the total:

• Cheques that were deposited but not cleared in the bank
• Interest/Bank Charges that the bank debited in a timely manner
• The bank made direct payments, and there was no entry in the Cashbook.
• Cheques that were returned unpaid with no entry in the cash book
• The bank’s error shows incorrect data on debits.

If the transaction is made with the bank balance in accordance with the bank passbook, the procedure described above will be reversed, i.e. the items listed here will be added to the passbook balance that was previously subtracted from the balance in the cash book, and those items will be subtracted from the bank passbook balance that was previously added to the balance in the cash book.

Steps in the BRS Preparation Process

1.The initial stage in BRS preparation is to determine the account’s characters and balance. In a Cash Book, a credit balance is classified as a bank overdraft, but a debit balance is considered an asset. The terminology in a Passbook, on the other hand, has the opposite connotation. A credit balance is regarded as a favorable balance in this case, but a debit balance is considered an overdraft. According to the scenario, the pupils must learn these terminology.

2. It is critical to begin with the overdraft and end with the overdraft in order to generate the BRS. If there are any discrepancies, they will be subtracted from or added to the amount for the items that were reconciled.

3.The balance of the subsequent book is the end outcome of such calculations. For example, if you start with the balance from the Pass Book, you must add or subtract all the items of difference before arriving at the Cash Book balance.

4.During the BRS preparation procedure, all differential items from both the Pass Book and the Cash Book must be considered.

5.The order will decide how such elements are added or subtracted by the individual generating the BRS statement.

Conclusion

Bank reconciliation is critical because it aids firms in identifying probable transaction errors that result in a discrepancy between accounting records and bank statements. A bank reconciliation statement also aids in the detection of suspected fraudulent acts, protecting the company from damages.