Q.State the causes of difference between the balance shown by the Cash Book and the balance shown by the Pass Book.
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Start your 14-day free trial to unlock the full solution →The causes of difference fall under three broad heads.
A. Timing differences
- Cheques issued by the firm but not yet presented for payment by the payee.
- Cheques/amounts paid into the bank for collection but not yet actually collected/credited by the bank.
B. Transactions recorded by the bank directly, not yet known to the firm
3. Bank charges, commission or locker rent debited by the bank.
4. Interest allowed by the bank on a credit balance, or interest charged by the bank on an overdraft.
5. Direct payments made by the bank under a standing instruction (insurance premium, loan instalment, subscription).
6. Direct receipts collected by the bank on the firm's behalf (interest/dividend on investments, a bill of exchange sent for collection, rent).
7. Amounts directly deposited into the firm's account by a customer or other party.
8. A cheque deposited and originally credited, later dishonoured and reversed by the bank.
C. Errors
9. An error by the firm in its own Cash Book (wrong amount, wrong side, omission).
10. An error by the bank in the Pass Book (rare, but possible). …
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