Rectification of Errors and Bank Reconciliation Statement (BRS): Causes, Methods and Format Questions

Question 1

What is rectification of errors?

Accepted Answer

**Rectification of errors** means correcting mistakes in accounts by passing suitable entries so that accounts show correct balances.

Question 2

Define Bank Reconciliation Statement (BRS).

Accepted Answer

**BRS** is a statement prepared to reconcile the difference between bank balance as per **cash book** and bank balance as per **pass book/bank statement** on a particular date.

Question 3

What is suspense account?

Accepted Answer

**Suspense account** is a temporary account opened to place the trial balance difference when the trial balance does not agree.

Question 4

State one cause of difference between cash book and pass book.

Accepted Answer

One cause is **cheques issued but not yet presented for payment**.

Question 5

Name any one error not disclosed by trial balance.

Accepted Answer

**Complete omission** of a transaction is not disclosed by trial balance.

Question 6

What is an error of principle?

Accepted Answer

An **error of principle** occurs when an item is recorded against accounting principles (e.g., **capital expenditure treated as revenue** or vice-versa).

Question 7

Explain types of errors in accounting (any three) with examples.

Accepted Answer

Types of errors (any three) with examples:

- **Error of omission**: transaction not recorded (e.g., purchase of goods Rs. 2,000 not entered).
- **Error of commission**: wrong posting/amount/side (e.g., posted to wrong account or wrong totaling).
- **Error of principle**: wrong classification (e.g., purchase of machinery treated as purchases).

Thus, errors may arise at recording, posting and classification stages.

Question 8

Explain errors disclosed and not disclosed by trial balance (any three each) with a table.

Accepted Answer

Trial balance checks only **arithmetical accuracy**.

Table:

| Disclosed by trial balance | Not disclosed by trial balance |
|---|---|
| one-sided posting | complete omission |
| posting to wrong side | errors of principle |
| wrong totaling/balancing | compensating errors |

Hence, agreement of trial balance does not guarantee that accounts are error-free.

Question 9

Explain suspense account: meaning, need and closing (any three points) with a mini flow.

Accepted Answer

### **Suspense Account**

- Suspense account is opened when trial balance **does not agree**, to temporarily keep the difference.
- It allows preparation of final accounts on time while errors are searched.
- When errors are located, rectification entries are passed and suspense balance is **eliminated/closed**.

Mini flow:

```text
Trial balance difference → Open Suspense A/c → Find errors → Pass rectification entries → Close Suspense A/c
```

Thus, suspense is temporary and should ultimately become nil.

Question 10

Explain rectification of errors before and after preparing trial balance (any three points).

Accepted Answer

Rectification differs based on when the error is found:

- **Before trial balance**: you can correct the original record/posting directly (rewrite correct amount/side).
- **After trial balance**: correction is generally done through a **rectifying journal entry** so that ledger balances become correct.
- If the trial balance was made to tally using **Suspense A/c**, rectification entries may involve suspense account until the difference becomes **nil**.

Thus, timing decides whether we directly correct the record or pass rectification entries (with or without suspense).

Question 11

Explain cheques issued but not presented and cheques deposited but not collected (any three points) with a table.

Accepted Answer

These are common **timing differences** causing mismatch between cash book and pass book.

- **Cheque issued but not presented**: cash book already **credited** bank (reduced balance), but pass book is not yet **debited**.
- **Cheque deposited but not collected**: cash book already **debited** bank (increased balance), but pass book is not yet **credited**.
- These items are adjusted in **BRS** to arrive at the correct reconciled balance.

Table (favourable balances):

| Item | Cash book effect | Pass book effect |
|---|---|---|
| Issued not presented | balance decreases | no change yet |
| Deposited not collected | balance increases | no change yet |

Hence, BRS mainly deals with such timing differences.

Question 12

Explain causes of difference between cash book and pass book (any five) with a table.

Accepted Answer

### **Causes of Difference between Cash Book and Pass Book (Any five)**

Common causes:
- **cheques issued** but not yet presented.
- **cheques deposited** but not yet collected/credited.
- **bank charges** debited by bank.
- **interest credited** by bank.
- **direct deposits** by customers.
- dishonour of cheques.
- errors in cash book or bank statement.

Table:

| Cause | Why difference arises |
|---|---|
| Cheque issued not presented | cash book reduced; bank not yet reduced |
| Cheque deposited not collected | cash book increased; bank not yet increased |
| Bank charges | bank reduced; cash book not updated |

**Conclusion:** BRS is prepared to explain these timing and recording differences.

Question 13

Prepare BRS (format and rules) starting with cash book balance (exam-style) with a mini add/less table.

Accepted Answer

### **BRS Starting with Cash Book Balance — Exam-Style**

Steps:
- start with **bank balance as per cash book**.
- adjust for items recorded in one book but not the other.
- arrive at **bank balance as per pass book**.

Mini add/less table (favourable balance):

| Item | Treatment in BRS (Starting with cash book) |
|---|---|
| Cheques issued but not presented | **Add** |
| Cheques deposited but not collected | **Less** |
| Bank charges not in cash book | **Less** |
| Interest credited by bank not in cash book | **Add** |

**Conclusion:** Use the same logic, but reverse signs for overdraft cases as asked in the question.

Question 14

Explain rectification of one-sided errors using suspense account (exam-style) with an illustrative entry and flow.

Accepted Answer

### **Rectification of One-Sided Errors using Suspense A/c — Exam-Style**

One-sided errors affect only one account/one side, so trial balance does not agree.

Illustration:
- Sales Rs. 5,000 correctly recorded in Sales A/c, but posting to Debtor’s A/c is omitted.
- Effect: Debtors are **understated** and TB credit is higher.

Rectification entry:
- **Debtor’s A/c Dr 5,000**
  To **Suspense A/c 5,000**

Flow:

```text
One-sided posting error → Trial balance difference → Open Suspense → Pass rectification entry → Suspense reduced/closed
```

**Conclusion:** Suspense account is used only temporarily and should become nil after all such errors are corrected.

Question 15

Differentiate rectification of errors and bank reconciliation statement (any three points) with a table.

Accepted Answer

### **Rectification vs BRS**

| Basis | Rectification of Errors | Bank Reconciliation Statement |
|---|---|---|
| Purpose | correct **accounting mistakes** | reconcile **cash book** vs **pass book** balances |
| Main reason | errors in recording/posting/classification | timing differences, bank charges/credits, etc. |
| Method | rectifying **journal entries** (sometimes **Suspense A/c**) | statement with **Add/Less** adjustments |

Thus, rectification corrects errors in books, while BRS reconciles bank balances.

Rectification of Errors and Bank Reconciliation Statement (BRS): Causes, Methods and Format

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