Q.Cheques issued by a business but not yet presented for payment will cause:
(A) the balance as per Pass Book to be higher than the balance as per Cash Book.
(B) the balance as per Cash Book to be higher than the balance as per Pass Book.
(C) no difference between the two balances.
(D) the balance as per Pass Book to be lower than the balance as per Cash Book.

This tests the basic direction of the very first, and most common, reconciling item covered in this chapter.

When a cheque is issued, the firm immediately reduces its own Cash Book balance, but the bank only reduces the Pass Book balance once the payee actually presents the cheque. Until then, the bank's own record (Pass Book) still shows the higher figure.

The correct option is (A).

When the firm issues a cheque, it immediately credits (reduces) its own Cash Book — from the firm's point of view, that money has already gone out. However, the bank only debits (reduces) the Pass Book once the payee actually presents the cheque for payment, which can take several days. Until the cheque is presented, the bank's records (Pass Book) still show a balance that is higher than the Cash Book's, by exactly the amount of the unpresented cheque(s) — which is exactly why this item must be ADDED when reconciling from the Cash Book balance to the Pass Book balance.

Why the other options are wrong:

• (B) is the opposite of what actually happens — it would be true for a cheque DEPOSITED but not yet collected, not a cheque issued but not presented.
• (C) is wrong because a genuine timing gap between issuing and presenting a cheque is one of the most common causes of difference — it does not disappear on its own before the cheque clears.
• (D) reverses the correct direction; the Pass Book is higher, not lower, until the cheque is presented.

Students often confuse this with the treatment of a cheque DEPOSITED but not yet collected, which works in exactly the opposite direction (Cash Book higher, not Pass Book) — keep 'issued' and 'deposited' clearly separate in your mind.