Explain in brief the reason for the difference caused by “cheques paid into the bank but not yet collected” with an example.
Asked by Topperlearning User | 15th Jul, 2016, 04:31: PM
Cheques deposited but not collected and credited by the bank:
Entry is passed by the firm/customer in the cash book when it receives cheques from its debtors which increase the balance as per the cash book. But, the bank credits the firm’s 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. This time gap between depositing of the cheques and the collection by the bank causes difference between the balances.
For example, XYZ Company Ltd. deposited a cheque of Rs.3,000 on April 20, 2016. The cheque was collected on May 2, 2016. In case, the bank sends a statement of account up to April 30, 2016; there will be a difference of Rs.3,000 between the balance shown by the cash book and the pass book.
Answered by | 15th Jul, 2016, 06:31: PM
- What is the need and purpose of preparing a bank reconciliation statement?
- 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.
- Explain briefly 4 reasons for disagreement between the cash book balance and the passbook balance caused because of time gap.
- 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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