Question

State the timing differences in BRS with examples.

Answer 1

1. Cheques issued but not presented for payment:
   

   When the cheques are issued by the business, it is immediately entered on the credit side of the cash book by the business. But, this may not be entered in the bank statement on the same day.
   lt will be entered in the bank statement only after it is presented with, For example, the balances as per cash book and bank statement are ₹ 20,000 for X & Co. X & Co. issued a cheque in favour of Y & Co for ₹ 10,000, on 27th March 2017. So, X & Co’s cash book is credited with ₹ 10,000 on 27th March 2017. But, the cheque is presented to the bank on 2nd April 2017.
   In case, the bank sends a statement to X & Co, upto 31st March 2017, it will not contain this transaction. As a result, there will be a difference of 10,000, between the balance shown as per cash book and the balance as per bank statement.

2. Cheques deposited into the bank but not yet credited:
   

   When the cheques are deposited into the bank, the amount is debited in the cash book on the same day. But, these may not be shown in the bank passbook on the same day because these will be entered in the bank statement only after the collection of the cheques.
   For example, the balances as per cash book and bank statement are ₹ 20,000 for X & Co. X & Co. receives a cheque on 25th March 2016, from ABC Limited for ₹ 5,000. On the same day, X & Co debits its cash book with ₹ 5,000.

   But the bank credits X & Co’s account only when the cheque is collected from ABC Limited’s bank. This shows that is a time gap between depositing the cheque by the customer (X & Co) and the collection of cheque by the bank.

3. Bank Charges and interest on loan and overdraft charged by the bank:
   

   The bank has to cover the cost of running the customer’s account. So debit is given to the account of the business towards bank charges.

   Also, if the business had taken any loan or overdrawn, interest has to be paid by the business. These entries for bank charges and interest are made in the bank statement. But, the entry is made in the cash book only when the bank statement is received by the business.

   Till then, the cash book shows more balance than a bank statement. For example, the opening balance as per the cash book and the bank statement as of 1st March 2017 is ₹ 7,000. Bank debits for bank charges ₹ 300 as of 27th March 2017. But there is no entry for the same in the cash book as on such date.