Subsidiary Books and Bank Reconciliation Statement
Subsidiary Books and Bank Reconciliation Statement tests the books of original entry and the reconciliation of cash book with passbook.
Core rules
- Cash book is both journal and ledger; two-column has cash and bank, three-column adds discount. Petty cash under imprest system is reimbursed for expenses.
- Purchases book records only credit purchases of goods; sales book only credit sales; returns books record returns; journal proper records opening entries, credit purchases of assets, adjustments and other non-specialised entries.
- BRS explains why cash book and passbook balances differ. Typical causes: cheques deposited but not credited; cheques issued but not presented; bank charges/interest; direct collections; standing instructions; dishonoured cheques; errors.
Worked example
Cash book debit balance ₹12,000. Cheques deposited ₹3,000 not yet credited; cheques issued ₹2,000 not presented; bank charges ₹150 not recorded; interest credited ₹500 not recorded. Balance as per passbook = 12,000 − 3,000 + 2,000 − 150 + 500 = ₹11,350. Reason: the passbook has not yet recorded the ₹3,000 deposit, so it is lower; the unpresented cheque means the bank still shows more; charges reduce and interest increases the passbook.
Traps
Reverse the direction for overdrafts; do not treat BRS as a ledger account; a cheque deposited but dishonoured later is a separate adjustment; adding charges instead of deducting them is a common error.