Explain the reasons where the balance shown by the bank passbook does not agree with the balance as shown by the bank column of the cash book.

Below given are the reasons on account of which the balance shown by the bank Pass Book does not agree with the balance shown by the bank column of the Cash Book.

1. Differences due to time lag: In the following situations, differences may arise, if the date of recording transactions in the bank column of the Cash Book is not same to that of in the Pass Book.
2. Cheques issued by the firm but presented after the date that is mentioned on the cheque or still not presented in the bank: Usually, issue of a cheque is recorded in the bank column of the Cash Book on the date that is mentioned (mentioned date) on the cheque. Sometimes, the holder of the cheque does not present the cheque on the date which is mentioned on it. This may lead to differences in the balance between the Pass Book and the bank balance of the Cash Book.
3. Deposit of cheque recorded in the Cash Book at the time of deposit but collected later or not collected by the bank: Deposit of a cheque is recorded in the bank column of the Cash Book on the date when it is deposited in the bank for payment but bank records it in the Pass Book on the date of clearance. Usually, date of deposit and date of clearance are not the same. This difference in the two respective dates leads to a mismatch between the Pass Book and the bank balance of the Cash Book.
4. Transactions recorded only in the Pass Book: Transactions, like interest allowed by bank on the deposits, bank charges, etc., are recorded first in the Pass Book. After getting intimation from the bank, these are recorded in the bank column of the Cash Book. However, sometimes, due to delay in intimation of these transactions to the customers, the Cash Book remains not updated, which leads to the difference between the Pass Book and the bank balance of the Cash Book.

Below given are the examples that lead to such differences.

1. The transactions that reduce balance of the Pass Book and are recorded only in the Pass Book and not in the Cash Book are given below.

1. Bank charges, charged by the bank but not recorded in the Cash Book

2. Dishonour of a bill discounted by the bank

3. Interest charged by the bank on overdraft

4. Direct payment made by the bank as per the instructions of the accountholder

2. The transactions that increase the balance of the Pass Book and are recorded only in the Pass Book and not in the Cash Book are given below.

1. When intimation regarding interests and dividend collected by the bank is not given to the accountholder

2. Amount deposited by any customer directly into the bank

3. Interest credited (allowed) by the bank

3. Errors and omissions

   Any error or omission committed in the Pass Book, such as double recording of a deposited cheque, wrong posting of amounts, current account cheque wrongly paid through saving account, etc., result in the difference of the balance between the Pass Book and the bank balance of the Cash Book.