**I.** Read the following transactions and identify the cause of difference on the basis of time gap or errors made by business firm/bank. Put a sign (✓) for the correct cause.

| S.No. | Transactions | Time Gap | Errors made by business/bank |
|---|---|---|---|
| 1. | Cheques is

Question

**I.** Read the following transactions and identify the cause of difference on the basis of time gap or errors made by business firm/bank. Put a sign (✓) for the correct cause.

| S.No. | Transactions | Time Gap | Errors made by business/bank |
|---|---|---|---|
| 1. | Cheques issued to customers but not presented for payment. | | |
| 2. | Cheque amounting to ₹5,000 issued to M/s. XYZ but recorded as ₹500 in the cash book. | | |
| 3. | Interest credited by the bank but yet not recorded in the cash book. | | |
| 4. | Cheque deposited into the bank but not yet collected by the bank. | | |
| 5. | Bank charges debited to firm's current account by the bank. | | |

**II.** Fill in the blanks:

(i) Passbook is a copy of ............. as it appears in the ledger of the bank.
(ii) When money is withdrawn from the bank, the bank ............. the account of the customer.
(iii) Normally, the cash book shows a debit balance, passbook shows ............. balance.
(iv) Favourable balance as per the cash book means ............. balance in the bank column of the cash book.
(v) If the cash book balance is taken as starting point the items which make the cash book balance smaller than the passbook must be ............. for the purpose of reconciliation.
(vi) If the passbook shows a favourable balance and if it is taken as the starting point for the purpose of bank reconciliation statement then cheques issued but not presented for payment should be ............. to find out cash balance.
(vii) When the cheques are not presented for payment, favourable balance as per the cash book is ............. than that of the passbook.
(viii) When a banker collects the bills and credits the account passbook overdraft shows ............. balance.
(ix) If the overdraft as per the passbook is taken as the starting point, the cheques issued but not presented are to be ............. in the bank reconciliation statement.
(x) When the passbook balance is taken as the starting point items which makes the passbook balance ............. than the balance in the cash book must be deducted for the purpose of reconciliation.

Accepted Answer

> [!TLDR]
> Part I: only item 2 is an error; the rest are timing differences. Part II answers, in order: customer's account, debits, credit, debit, added, deducted, less, less, added, higher.

### Part I — Time gap or error?

| S.No. | Transaction | Cause |
|---|---|---|
| 1 | Cheques issued but not presented for payment | **Time gap** — the cash book is reduced at once; the bank only later. |
| 2 | Cheque of ₹5,000 recorded as ₹500 in the cash book | **Error** (by the firm) — a wrong amount was entered. |
| 3 | Interest credited by the bank, not yet in the cash book | **Time gap** — the bank has recorded it; the firm will, on receiving the statement. |
| 4 | Cheque deposited but not yet collected | **Time gap** — the cash book is raised at once; the bank credits only on clearing. |
| 5 | Bank charges debited by the bank | **Time gap** — the bank has debited it; the firm records it later. |

### Part II — Fill in the blanks

(i) Passbook is a copy of the **customer's account** as it appears in the ledger of the bank.

(ii) When money is withdrawn from the bank, the bank **debits** the account of the customer.

(iii) Normally, the cash book shows a debit balance; the passbook shows a **credit** balance.

(iv) Favourable balance as per the cash book means a **debit** balance in the bank column of the cash book.

(v) If the cash book balance is the starting point, items that make the cash-book balance smaller than the passbook must be **added** for reconciliation.

(vi) If the passbook shows a favourable balance and is the starting point, cheques issued but not presented should be **deducted** to find the cash balance. …

Particulars	Debit (₹)	Credit (₹)
Profit and Loss Appropriation A/c Dr.	xxx
To Partner's Capital/Current A/c		xxx
(Being interest on capital provided for the year, considering time lag)

Particulars	Debit (₹)	Credit (₹)
Partner's Capital/Current A/c Dr.	xxx
To Profit and Loss Appropriation A/c		xxx
(Being interest on drawings charged for the year, considering time lag)

Dr.	Profit and Loss Appropriation Account for the year ended 31st March, 20XX	Cr.
Particulars	Amount (₹)	Particulars
To Interest on Capital:		By Profit and Loss A/c (Net Profit)
Partner A	xxx	By Interest on Drawings:
Partner B	xxx	Partner A
To Partner's Salary/Commission	xxx	Partner B
To Profit transferred to:
Partner A's Capital A/c	xxx
Partner B's Capital A/c	xxx
Total	xxx	Total

Concept understanding — Time Lag Causes

Time Lag Causes in Accountancy — A First Look

The Precise Meaning

Why It Matters

The Formula (Plain Text)

Accounting Treatment

Interest on Capital (with time lag)

Interest on Drawings (with time lag)

The Proforma — Profit and Loss Appropriation Account

Part I — Time gap or error?

Part II — Fill in the blanks

S.No.	Transactions	Time Gap	Errors made by business/bank
1.	Cheques issued to customers but not presented for payment.
2.	Cheque amounting to ₹5,000 issued to M/s. XYZ but recorded as ₹500 in the cash book.
3.	Interest credited by the bank but yet not recorded in the cash book.
4.	Cheque deposited into the bank but not yet collected by the bank.
5.	Bank charges debited to firm's current account by the bank.

S.No.	Transaction	Cause
1	Cheques issued but not presented for payment	Time gap — the cash book is reduced at once; the bank only later.
2	Cheque of ₹5,000 recorded as ₹500 in the cash book	Error (by the firm) — a wrong amount was entered.
3	Interest credited by the bank, not yet in the cash book	Time gap — the bank has recorded it; the firm will, on receiving the statement.
4	Cheque deposited but not yet collected	Time gap — the cash book is raised at once; the bank credits only on clearing.
5	Bank charges debited by the bank	Time gap — the bank has debited it; the firm records it later.

Part I — Time gap or error?

Part II — Fill in the blanks

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