It is generally prepared as an annexure to the accounting period end financial statements to explain the difference between the balance as shown in the books and the balance shown by the supporting document i. A firm or an individual prepares it to reconcile the causes of difference between the bank balance as per cash book and the bank balance as per pass book. Here the cash book shows a balance of rs 2,370 whereas the pass book shows a balance of rs 2,430. Therefore, the 2nd step will be to reverse the entries which result in the difference among balances of pass book and cash book. Why there is a difference between cash book and bank statement balance in bank. Now, in the bank reconciliation statement, this interest of rs. What is bank reconciliation statement meaning, purpose. Difference between cash book balance and bank statement. A cash book is an exceptional journal which is used to record all cash receipts and cash payments. In this case, there would be a difference between thebalances as per cash book and as per pass book. Bank reconciliation statement process illustration. In the statement, all the deposit will be shown in the credit column and withdrawals will be shown in the debit column.
Differences between cash balances of bank and cash book. When extract of cash book and pass book are given for common period, only uncommon items are considered for preparation of bank reconciliation statement. These differences between cash book and passbook arise either due to timing differences in recording transactions in respect of payments and receipts or errors on the part of business entity or bank in recording transactions. All transactions related to bank are recorded in the bank. The bank records transactions in a bank statement also known as pass book whereas the customer records all the bank transactions in a cash book. Reasons for difference between bank balances as per cash book and pass book. Cash book is prepared by the firms whereas passbook is written by banks and retained by the customer.
This may cause the difference between cash book and pass book balance. The relationship between the customer and the banker is that of a creditor and a debtor. Difference between cash book and pass book qs study. Procedure for omission of entry in bank reconciliation. So, if the bank columns of the cash book show a debit balance as on a specified date, the bank statement should show an equal amount of credit balance as on that date and viceversa.
Such a process determines the differences between the balances as per the cash book and bank passbook. Distinction between cash book and pass book, accounting. The following are its advantages in which lies its importance. What are the reasons for difference between cash book and pass book. Subscribe to our youtube channel to watch more accounting lectures. As you can see, we get the balance as per the cash book so you will begin to do. This will increase the balance in the passbook and a difference in the two balances will exits unless a corresponding entry is recorded in the cash book by the firm. Preparing the bank reconciliation statement 2 methods. Ncert solutions for class 11 commerce accountancy chapter. All items which have caused the difference between the balance as per cash book and balance as per pass book are to be examined and analyzed. As a result, the balanceof the bank pass book and cash book. A cash book is a financial journal that contains all cash receipts and. Now, the bank balance showcased in the passbook or the bank statement must match with the balance reflected in the cash book of the customer. All transactions related to bank are recorded in the bank column of the cash book and these transactions are also recorded in the pass book by the bank.
Brs is not prepared on every instance of a difference between cash book balance and bank pass book balance. Transactions, like interest allowed by bank on the deposits, bank charges, etc. The balance mentioned in the bank passbook of the statement must tally with the balance mentioned in the cash book. Important questions for class 12 accountancy chapter 5. When extract of cash book and pass book are given for common. A statement sent by the bank that day does not show this rs. When extracts of cash book and pass book are given for. Cash book is written by depositor and pass book is written by the bank. Difference between balances as per cash book and bank pass book.
A passbook is a book which the bank issues to the account holder for the purpose of recording such transactions. Reconciliation of the cash book and the bank passbook balances amounts to an explanation of differences between them. Hence, there is a time gap between the entry made in the cash book and the one made in the bank pass book. May 23, 2017 difference between cash book and passbook last updated on january 8, 2018 by surbhi s there are end number of transactions occur in the normal course of business, where in receipt or payment is made in cash or cheque. Cheques issued but not yet presented for payment in the bank. Difference in balance as per pass book and balance as per. Bank reconciliation statement is a statement prepared to reconcile the difference between the balances as per the bank column of the cash book and bank statement pass book on any given date. That is why, the preparation of bank reconciliation statement is vital, to find out the causes of differences in the two and eliminating them. After getting intimation from the bank, these are recorded. Important questions for class 12 accountancy chapter 5 bank. Cheques issued by the businessman but not presented for payment before the bank. The differences between the cash book and the bank passbook is caused by. The difference between this two books are cash book maintained by an individual whereas pass book is maintained by a bank.
Bank reconciliation statement accountancy notes, questions. Jan 06, 2021 difference between cash book and pass book. So, if the bank columns of the cash book show a debit balance as on a. When extracts of cash book and pass book are given for uncommon periods, only common items are considered for preparation of bank reconciliation statement. Oct 06, 2019 the following are the reasons for the difference between the balances shown by the cash book and the pass book. Furthermore, it gets easier to ascertain the correct amount of balance at the bank in the balance sheet. Jan 08, 2018 the paramount differences between cash book and pass book are explained in the given below points. Deposits of cash entered on the debit side of the cash book. Ncert solutions for class 11 commerce accountancy chapter 5. Cheques recorded in cash book but not yet credited by bank. Causes of difference between cash book and passbook balances. Difference between cash book and passbook difference wiki.
Reasons for the difference between cash book balance and pass book balance. Difference between cash book and passbook with comparison. Causes for difference between cash book balance and pass book balance. All transactions related to a bank are recorded in the bank column of the cash book and these transactions are also recorded in the pass book by the bank. Cash book is maintained by the individual who enters day to day transaction pertains to receipts and payments whereas passbook is issued by the bank to the account holder having deposits and withdrawals with that bank. The difference between the left and right sides shows the balance of cash on hand, which should be a net debit balance if cash flow is positive. The title of debit and credit columns has been changed to. Need of brs, reasons of difference between cash book. There is a slight difference between cash book and passbook, that is cash book keeps a record of cash transactions whereas passbook is. Interest and dividend collected by the bank if the bank collects dividend on shares, interest on investments, etc on behalf of its customer, it credits the amount in the passbook. Sometimes the difference between the two balances may be accounted for by an error on the part of the bank or an error in the cash book of the business.
Following are the main points of difference between cash book and pass book. One copy of this statement is also sent to the bank if the bank has made some errors or mistakes in the pass book. The bank reconciliation statement is the process of checking the differences between a bank column of the cash book and the bank statement or passbook. A bank reconciliation statement is mainly prepared to. Bank reconciliation statement is generally prepared at the end of the month or the year and it is not necessary when there is no disagreement between the pass book balance and the cash book balance. It is prepared from time to time to check that all transactions relating to bank are properly recorded by the businessman in the bank column of the cash book and. Bank reconciliationppt principle of accounting 1 bank. Errors in recording transactions by the firm or by the bank errors such as wrong recordings relating to cheques depositedissued, wrong totaling or omission can be committed by the bank or the firm which can cause a difference between the cash book and. A bank reconciliation statement is prepared with the balance of a cash book b pass book c either cash book or pass book d. Need and importance of bank reconciliation statement 14. Mcq questions for class 11 accountancy chapter 5 bank. In this analysis, the impact of the transactions on the balance as per cash book should be taken, if starting point is the balance as per pass book. A pass book is a copy of a a customers account in the banks book b cash book relating to bank column c cash book relating to cash column d firms receipts and payments. Oct 25, 2020 we therefore always begin with either the cash book balance or the pass book balance.
In this way, the number of items that cause the difference between the passbook and the cash book balance gets reduced. The same was adjusted in the cashbook before reconciliation statement. In a cash book, the cheques issued for payment are recorded without any delay. The difference between the bank balance shown by the cash book and the balance shown by the bank pass book can also be caused due to error or omission. The main reasons for differences between the cash book and the bank statement. Reasons for difference in pass book and cash book balances. Look on the debit side of cash book and deposit column of the pass book, check item by item, one can find that two cheques have been deposited into bank but were not credited in the pass book because there is no entry in the pass book till 31st january 2004. Generally, the difference in the balances of cash book and passbook is due to time gap i. It increases the bank balance as per the cash book. What is the difference between bank book and cash book.
There was difference in the bank column of cash book and pass book by rs. But due to reasons like timing differences the balances of both these books do not match. A bank reconciliation statement brs refers to a statement which a firm prepares to reconcile the causes of difference between bank balance as per cash book and bank balance as per pass book or bank statement. These two books are opposites of each other which means if one shows credit balance then the other would reflect a debit balance of the exact same amount. Overdraft as per the passbook is less than the overdraft as per cash book when there are cheques deposited but not collected by the banker.
Cheques deposited for collection entered on the debit side of the cash book on the date of depositing the cheques into the bank. The main difference between cash book and passbook is that cashbook saves the records of cash dealings, whereas the passbook is providing by the banks to their account holders to record the payment and withdraw of money. Passbook is issued by the bank to the account holder that records the deposits and withdrawals. Looking for last minute deals on historic hotels in karol bagh. A bank reconciliation statement is prepared with the help of. Ncert solutions for class 11 financial accounting bank. A few days are taken in clearing of local cheques and in case of outstation cheques few more days are taken. Both balances are equal but opposite generally these two balances do not agree. When a cheque is drawn or issued in favour of a third party, it is immediately recorded in the cash book by debiting the party and crediting the bank and this has the effect of. A bank reconciliation statement is prepared to know the causes for the difference between. As a result, there is a difference between the balances of the cash book and the pass book. There is always a difference in the time gap between recording the transactions in the books of account and those recorded by the bank. Apr 02, 2020 the main difference between cash book and passbook is that cashbook saves the records of cash dealings, whereas the passbook is providing by the banks to their account holders to record the payment and withdraw of money. Eleborate the difference between bank book and cash book.
Items appearing in cash book but not appearing in pass book items appearing in pass book but not appearing in the cash book. The difference between the left and right sides shows the balance of cash on hand, which. Difference between a cash book balance and bank statement. Errors committed in recording transactions by the bank sometimes, bank may also commit errors, e.
Bank reconciliation statement is also known as bank passbook. Such charges and commission are debited in the passbook but no. Therefore, the cash book and passbook are expected to tally, but practically, this happens rarely due to the time gap between the entries made. But, the bank credits the firms account after these cheques are actually realized. No basis of distinction cash book bank column pass book 1. The cash book bank column maintained by the account holder. Sep 19, 2018 sometimes, the bank balance as per cash book and passbook does not tally with each other, then we can know the difference between them by preparing the bank reconciliation statement. Cheques deposited for collection entered on the debit side of the cash book on the date of. The paramount differences between cash book and pass book are explained in the given below points.
But the bank records the entry only when the cheque is presented to them for payment. It is a statement prepared at the end of every month or so to explain the causes for differences between the balance of passbook and bank column of the cash book, as on a particular date and to reconcile between both the balances for the purpose of cross verification. The balance on the cash account which should be the same as the balance in the cash book is compared to the balance on the bank statements at a given date. Withdrawals of cash entered on the credit side of the cash book. Differences due to the recording of transactions by the bank. This difference in the two respective dates leads to a mismatch between the pass book and the bank balance of the cash book.
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