Accountancy · Ch 8 — Bank Reconciliation Statement
Reasons for the Difference between Cash Book and Pass Book Balances
Reasons for the Difference between Cash Book and Pass Book Balances
The two balances can differ for two broad kinds of reasons — genuine timing differences (by far the more common) and errors (rarer, but must always be checked for).
Timing differences — a transaction has been recorded by ONE side but not yet by the other, simply because of the time it naturally takes to clear:
| Cause | Recorded first by |
|---|---|
| Cheques issued by the firm but not yet presented for payment by the payee | Firm (Cash Book) |
| Cheques deposited by the firm but not yet collected/credited by the bank | Firm (Cash Book) |
| Bank charges / interest on overdraft debited by the bank | Bank (Pass Book) |
| Interest or dividend collected by the bank on the firm's behalf | Bank (Pass Book) |
| Direct payments made by the bank under standing instructions (e.g., insurance premium) | Bank (Pass Book) |
| Amounts directly deposited by a customer into the firm's bank account | Bank (Pass Book) |
| A cheque deposited by the firm, later dishonoured by the bank | Bank (Pass Book) |
Errors — committed by either the firm (in its own Cash Book) or by the bank (in the Pass Book) — e.g., an amount entered with the wrong figure, a transaction entered twice, or a transaction of another customer wrongly posted to this account. …
Cheques the firm has already written and recorded as paid in its Cash Book, but which the payee has not yet presented to the bank for payment — the bank has not yet redu …
Cheques the firm has already recorded as received in its Cash Book, but which the bank has not yet cleared and credited — the bank has not yet increased …