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A learner sees deposits marked as credits on the bank statement but recorded as debits in the cash book and assumes one record is wrong.
The bank records the account as its liability to the customer; the business records it as its own asset. Every entry therefore appears on opposite sides of the two records.
Deposit: bank credit, cash book debit. Withdrawal or charge: bank debit, cash book credit. Balance marked Cr on a statement is a positive balance; Dr or minus is overdrawn.
Correct reading of both records and correct add or deduct signs when preparing a bank reconciliation statement.
The bank writes your account from its own side. A deposit is money the bank now owes you, so in its records it is a credit. Your cash book treats the bank balance as your asset, so the same deposit is a debit there. Every entry in one record is a mirror image of the other.
Why does the bank see your account the other way round?
When you put money in a bank, the bank is holding it for you. From the bank’s point of view, your balance is a liability: money it must repay when you ask. A liability goes up with a credit. So the bank credits your account when you deposit.
From your point of view, the money in the bank is an asset. An asset goes up with a debit. So your cash book (bank column) debits the deposit.
Same event, same amount, opposite sides. Neither record is wrong.
What do Dr and Cr beside the closing balance mean on an Indian statement?
Many Indian banks print Cr or Dr after the balance figure. Some use a minus sign instead.
- Cr means the balance is in your favour. The bank owes you. This is the normal state of a savings or current account with money in it.
- Dr (or a minus sign) means the account is overdrawn. You owe the bank. You will see this on an overdraft or cash credit account.
So “₹1,25,000 Cr” on a statement equals a debit balance of ₹1,25,000 in your cash book. “₹40,000 Dr” on a statement equals a credit balance of ₹40,000 in your cash book.
The same four events in both records
| Event | Bank statement (passbook) | Your cash book (bank column) |
|---|---|---|
| You deposit a customer’s cheque | Credit (Cr) | Debit (Dr) |
| You pay a supplier by cheque or NEFT | Debit (Dr) | Credit (Cr) |
| Bank deducts a service charge | Debit (Dr) | Credit (Cr), once you record it |
| Bank credits interest | Credit (Cr) | Debit (Dr), once you record it |
In Tally or Zoho Books, the bank ledger behaves like the cash book: receipts increase it on the debit side and payments reduce it on the credit side.
Why does this reversal matter when you prepare a BRS?
A bank reconciliation statement (BRS) compares your cash book balance with the passbook balance and lists the items that explain the gap. If you forget that the two records are mirror images, you put items on the wrong side and the BRS never balances.
Worked example. On 1 May both records show ₹2,00,000. During the day:
- You deposit a customer cheque of ₹50,000.
- You pay a supplier ₹12,000 by NEFT.
Your cash book: opening debit balance ₹2,00,000 + ₹50,000 (debit) − ₹12,000 (credit) = ₹2,38,000 debit balance.
The passbook: opening ₹2,00,000 Cr + ₹50,000 (credit) − ₹12,000 (debit) = ₹2,38,000 Cr.
Both say ₹2,38,000. The sides are reversed, but the balance is the same. Now suppose the cheque has not cleared by the end of the day. The passbook shows ₹1,88,000 Cr (₹2,00,000 − ₹12,000), while your cash book still shows ₹2,38,000. The ₹50,000 gap is a deposit not yet credited, and starting from the cash book you deduct it to reach the passbook: ₹2,38,000 − ₹50,000 = ₹1,88,000.
A memory rule: your debit is the bank’s credit, and your credit is the bank’s debit. When you start a BRS, decide which balance you start from, then ask, “Does this item make the other balance higher or lower?” Higher means add. Lower means deduct.
What to read next
- Next in this series: Bank reconciliation statement: when do you add and when do you deduct?
- Go deeper: What is a reconciliation statement?
- Background: What is bank reconciliation?
- For teams: Bank reconciliation software for India
When the volume is large, TransactIG matches bank statement lines to the books, so the sign work is done line by line and only the exceptions need your attention.