Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →
A bank reconciliation statement balances on paper but may still hide plugs, stale items, wrong statement balances or unreviewed errors.
Apply five checks: adjusted balances agree, every item is documented, prior-month items cleared, statement balance verified at source, independent review.
Red flags: miscellaneous or balancing lines, items older than about 90 days, hand-typed statement balances, preparer signing as reviewer.
A BRS signed by preparer and reviewer with each item supported, ready for the auditor's file.
A bank reconciliation is right when five things are true: both adjusted balances agree to the rupee, every reconciling item has a document behind it, last month’s items have cleared, the statement balance is the bank’s own figure, and someone other than the preparer has reviewed it. A BRS that only balances has passed one check out of five.
The five checks
| Check | What to look at | Red flag |
|---|---|---|
| 1. Adjusted balances agree | Adjusted cash book (after bank-only entries) and adjusted passbook (after timing items) | Any difference, even ₹1, or a line called miscellaneous, difference or rounding |
| 2. Every item has a document | Cheque counterfoil, pay-in slip, bank advice, charge debit note, loan schedule | An item with no paper or email behind it |
| 3. Last month’s items cleared | Last month’s open items against this month’s statement | An item older than about 90 days still sitting in the BRS |
| 4. Statement balance is the bank’s own | Closing balance compared with the statement downloaded from net banking | A balance typed in by hand or copied from an old file |
| 5. A second person reviewed it | Signature or approval of someone other than the preparer | The preparer signing as reviewer |
For check 2, remember that bank charges usually carry GST at 18 percent: a ₹590 debit is ₹500 of charges plus ₹90 of GST, and the document behind it is the bank’s charge advice or GST invoice.
What is a plug figure, and why should it never appear in a BRS?
A plug is an amount added to make the statement balance when the real reason has not been found. It is often written as “miscellaneous”, “difference” or “rounding off”. It looks harmless when small. It is not.
Worked example. A clerk’s March BRS reads:
| ₹ | |
|---|---|
| Balance as per cash book | 2,46,000 |
| Add: cheque issued, not presented | 15,000 |
| Add: miscellaneous difference | 1,000 |
| Balance as per passbook | 2,62,000 |
The arithmetic works: ₹2,46,000 + ₹15,000 + ₹1,000 = ₹2,62,000. But the reviewer asks what the ₹1,000 is. Looking through March, she finds that a ₹1,000 courier payment was entered twice in the cash book, once by cheque voucher and once as a cash voucher by mistake. The bank paid it once.
The fix: reverse the duplicate entry. The cash book rises to ₹2,47,000. The BRS becomes ₹2,47,000 + ₹15,000 = ₹2,62,000, with no plug. The “miscellaneous” line was hiding a real error, and next time it might hide a larger one.
How do you check last month’s items?
Take last month’s BRS. For every open item, find it on this month’s statement:
- Cheques not presented last month should appear as debits this month.
- Deposits not credited last month should appear as credits in the first few days.
- Anything that has not appeared needs a reason. A cheque may be lost, a deposit may have bounced, or the item may have been an error from the start.
As a working rule, an item older than about 90 days is not a timing difference any more. For cheques, three months from the cheque date is also when they become stale and the bank will not pay them.
Who reviews when one person keeps the books?
Many small businesses have one accountant. That is fine, as long as someone else looks at the BRS each month. The owner, a partner or the outside CA can:
- Open net banking and compare the closing balance with the BRS.
- Pick two or three reconciling items and ask for the document.
- Check that no item is older than the house limit.
- Sign and date the BRS.
The preparer should never sign as reviewer. The purpose of the review is a second pair of eyes.
What to read next
- Next in this series: Statutory audit reconciliation checklist for India
- Go deeper: Month-end close reconciliation checklist for India
- Background: Which BRS items need a journal entry?
- For teams: Bank reconciliation software for India
TransactIG matches bank statement lines to the books, keeps every unmatched item in an exception queue and produces audit-ready exports, which makes the reviewer’s job a check rather than a rebuild.