Harsha Lal- ACW Accounts at edumarz
Ans- The difference in timing can be caused by many factors which are:-
Bank-issued cheque but not yet deposited for payment- As soon as there is an issue of cheque the cash book balance immediately increases. But the balance as per pass book of the bank remains identical as the payment isn’t deposited yet.
Cheques deposited but yet not collected by the bank- This transaction immediately increases the balance as per cash book , but the bank pass book balance remains identical, until the cheque is cleared and picked up by the bank.
Cheque/ amount deposited on to the bank account- There may sometimes be a situation when the firm’s debtor directly deposits the money in the firm’s account. This increases the balance of the bank pass book , but the balance of the cash book remains the same.
Direct debits made by the bank- There is a specific amount of fee which a bank charges for providing services I.e the nominal fee. This amount the bank deducts from the bank account without its knowledge. Ex – interest on overdraft, incidental charges etc. As a result of this the pass book shows a lower balance than the cash book.
Interest and dividend collected by the bank- When the interest and dividend is collected by the bank on behalf of its customers. Then the pass book shows an increased balance because the amount here is credited. But the same is not recorded in the bank cash book. Therefore, there arises some differences.
Cheques deposited/bills discounted dishonored- If a cheque deposited by the firm is dishonored or a bill of exchange drawn by the firm is discounted with the bank is dishonored and also the same is debited to the customer’s account in the pass book by the bank. As this information isn’t available to the firm immediately, so there’ll be no entry in the firm’s cash book regarding the same . As a result, the balance as per the cash book will be more than the pass book.