Explain briefly 4 reasons for disagreement between the cash book balance and the passbook balance caused because of time gap.
Asked by Topperlearning User | 15th Jul, 2016, 04:34: PM
There are certain differences caused by time gap in recording the transactions relating either to receipts or payments.
Cheques issued but not presented for payment at the bank
The firm/customer issues cheques to its suppliers and creditors, but not all these cheques are presented to the bank. The entry in the cash book is made immediately on issue of the cheque but the bank will not pass an entry until the cheque is presented for payment.
Cheques paid or deposited but not collected and credited by the bank
Entry is passed by the firm in the cash book when it receives cheques from its debtors which increase the balance of the cash book. But the bank credits the firms account only when they have received the payment from the customer’s bank or in other words, once the cheque is collected by the bank.
Amounts directly deposited in the customer’s account
There are times, when the firm’s debtors deposit money or make payments directly into the firm’s bank account. This results in an increase in the balance of the bank account. As no intimation is received from the firm, there will be no record of the same in the cash book.
Expenses directly paid by the bank on behalf of the customers
Depending upon the instruction of the customer, the bank makes regular payment on behalf of the customer. The bank debits the customers/firms account when the payment is made but the firm/customer will pass the entry in his book only after he receives the bank statement.
Answered by | 15th Jul, 2016, 06:34: PM
- What is the need and purpose of preparing a bank reconciliation statement?
- Explain in brief the reason for the difference caused by “cheques paid into the bank but not yet collected” with an example.
- What is bank reconciliation statement and why is it prepared?
- Explain the causes/reasons for the disagreement between the cash book balance and the passbook balance.
- Give two examples of errors committed by the firm in recording transactions in the cash book.
- Give two examples of errors committed by the bank in recording transactions in the passbook.
- List 4 items having an effect of higher balance in the passbook.
- List 4 items having an effect of higher balance in the cash book.
- What is debit balance and credit balance as per cash book and bank pass book?
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