Differences Caused by Errors

Errors That Cause Differences

Not every difference between the cash book and the passbook arises from timing. Sometimes, a mistake has been made — either by the business firm in its own cash book, or by the bank while recording transactions in the passbook. These errors create a genuine mismatch that must be corrected before reconciliation can proceed.

5.1.2(a) Errors by the Firm

When the business itself commits an error while recording entries in the cash book, the cash book balance becomes wrong. The passbook, however, shows the correct position as per the bank's records. Common errors by the firm include:

• Omission of a transaction — for example, forgetting to record a cheque issued or a cheque deposited.
• Wrong recording of an amount — such as recording a cheque of ₹5,000 as ₹500 in the cash book.
• Wrong totalling — an addition or subtraction mistake in the bank column of the cash book.
• Double recording — entering the same cheque twice.

In each case, the cash book needs to be corrected. The error is identified by comparing the cash book entries with the passbook entries. Once found, a correcting journal entry is passed in the books of the firm.

5.1.2(b) Errors by the Bank

The bank can also make mistakes while posting entries to the customer's account. These errors cause the passbook balance to be wrong, while the cash book remains correct. Examples include:

• Omission — the bank fails to credit a deposited cheque or fails to debit a cheque issued.
• Wrong recording — the bank enters a wrong amount for a cheque deposited or issued.
• Wrong totalling — the bank makes an arithmetic error in the customer's account.
• Wrong debit or credit — the bank debits or credits the account of another customer by mistake. …