Mnemonics: Bank Reconciliation Statement | Accounting for CA Foundation PDF Download

The Bank Reconciliation Statement is vital for ensuring the accuracy of financial records by aligning a company’s cash book with its bank statement. This topic teaches students how to identify and resolve discrepancies, such as unpresented cheques or bank errors, fostering skills in financial accuracy and fraud detection. The mnemonic provided helps students quickly recall the steps and components, streamlining their preparation and practical application.
Mnemonic: BRIDGE - Balance Reconciliation, Identify Differences, Gather Evidence.

Key Differences

Mnemonic: COPS-DOC

• C – Cheques Issued but Not Presented: Cheques issued by the firm that haven’t been cleared by the bank yet.
• O – Outstanding Cheques Deposited but Not Credited: Cheques deposited into the bank but not yet cleared or recorded in the passbook.
• P – Payment by Bank Not Entered in Cash Book: Bank has made payments (like standing instructions) not yet updated in the cash book.
• S – Standing Instructions (Bank Deducts Automatically): Automatic payments made by the bank (like EMIs, insurance) not recorded in cash book.
• D – Direct Deposit by Customer Not Recorded in Cash Book: Money directly credited by a customer to the bank, but not yet noted in cash book.
• O – Overdraft Interest Charged by Bank: Bank charges deducted that haven't been entered in the cash book.
• C – Cheques Dishonoured: Cheques that were returned unpaid by the bank, not yet updated in cash book.

Mnemonic Explanation: The mnemonic "COPS-DOC" helps recall the key differences causing discrepancies between the cash book and bank statement. Each letter represents a common reason: Cheques Issued, Outstanding Cheques, Payment, Standing Instructions, Direct Deposit, Overdraft Interest, and Cheques Dishonoured, picturing a cop documenting these issues.

Approach to Prepare BRS

Mnemonic: BBC-WDR

• B – Begin with Balance as per Cash Book / Pass Book: Choose the starting point as given in the question.
• B – Be careful about additions and subtractions: Understand whether each item should be added or subtracted.
• C – Compare transactions in both books: Match each transaction from cash book to pass book.
• W – Watch for errors: Look for mistakes in recording in either book.
• D – Deduct or Add depending on item nature: Use logic to decide adjustment.
• R – Reconcile and arrive at final balance: Calculate the corrected balance.

Mnemonic Explanation: The mnemonic "BBC-WDR" guides the approach to preparing a Bank Reconciliation Statement. Each letter stands for Begin, Be careful, Compare, Watch, Deduct/Add, and Reconcile, imagining a careful broadcast leading to a well-reconciled result.

Adjustment Rules

Mnemonic: Add PDC, Less ISC

• Add:
  • P – Proceeds collected by bank not in Cash Book: Eg. bank collected interest or dividend directly.
  • D – Direct deposit by customer: Bank credited amount, firm unaware.
  • C – Cheques issued but not presented: Amount not yet debited from bank account.
• Less:
  • I – Interest/Charges debited by bank: Eg. overdraft charges, interest on loans.
  • S – Standing instructions: Automatic deductions by bank not updated.
  • C – Cheques deposited but not credited: Still in clearing, not yet reflected by bank.

Mnemonic Explanation: The mnemonic "Add PDC, Less ISC" simplifies adjustment rules for the Bank Reconciliation Statement. "Add" stands for Proceeds, Direct deposit, and Cheques issued, while "Less" represents Interest, Standing instructions, and Cheques deposited, guiding whether to increase or decrease the balance.

Purpose of BRS

Mnemonic: BRING CASH

• B – Bank
• R – Reconciliation
• I – Is
• N – Necessary to
• G – Get
• C – Correct
• A – Accounts and
• S – Show
• H – Harmony

Mnemonic Explanation: The mnemonic "BRING CASH" highlights the purpose of the Bank Reconciliation Statement. Each word stands for Bank, Reconciliation, Is, Necessary, Get, Correct, Accounts, Show, and Harmony, picturing it as a tool to bring cash accounts into harmony.