Fundamentals of Accounting · Bank Reconciliation Statement

Causes of Difference Between Cash Book and Pass Book

Updated 11 October 2026 · Fact-checked

The cash book is your record of bank dealings. The pass book is the bank's record of your account. Balances differ because of timing (cheques issued but not presented, cheques deposited but not cleared), items the bank records first (charges, interest, direct deposits, dishonoured cheques), and errors.

Understand Causes of Difference Between Cash Book and Pass Book

When you have a bank account, two records exist. The cash book (bank column) is kept by you. The pass book (bank statement) is kept by the bank. Both show the same money, but from opposite sides.

The pass book is the bank's ledger copy of your account. A deposit you make is a credit in it, because the bank owes you that money. A withdrawal is a debit. In your cash book it is the reverse: a deposit is a debit and a payment is a credit. So a debit balance in your cash book matches a credit balance in the pass book.

The two balances differ for three reasons. First, timing differences: you record a transaction on the day you do it, but the bank records it when the cheque is presented or cleared. Second, items the bank records that you do not know about yet: bank charges, interest, direct deposits by customers, standing instructions and dishonoured cheques. Third, errors by you or by the bank, such as a wrong amount or a missed entry.

Two timing items come up most. Cheques issued but not presented are cheques you gave to suppliers and recorded as payments, but the supplier has not yet taken them to the bank. The bank balance is still higher than your cash book. Cheques deposited but not yet cleared (collected) are cheques you recorded as receipts, but the bank has not yet credited them. The bank balance is still lower than your cash book.

A difference is not always a mistake. Most differences are normal. The Bank Reconciliation Statement (BRS) is the tool that explains them. First learn to say, for each item, which book has it and which book does not.

Key rules to remember

Cheque issued but not presented: Cash book: credited (payment). Pass book: not yet debited.; Pass book balance is higher than the cash book balance because of this item.
Cheque deposited but not cleared: Cash book: debited (receipt). Pass book: not yet credited.; Pass book balance is lower than the cash book balance because of this item.
Bank charges, interest on overdraft, standing instructions paid: Pass book: debited. Cash book: not yet credited.; Cash book balance is higher until you record them.
Interest or dividend credited by bank, direct deposit by customer: Pass book: credited. Cash book: not yet debited.; Cash book balance is lower until you record them.
Dishonoured cheque (deposited earlier): Pass book: debited when returned. Cash book: not yet credited.; You had debited the cash book on deposit, so you must now reverse it.

How to solve Causes of Difference Between Cash Book and Pass Book questions

Use this method whenever a question asks why the two balances differ or asks you to classify items.

1Read each item and decide whose record it is in: cash book only, pass book only, or both.
2Find out what the cash book did: debit (receipt) or credit (payment).
3Find out what the pass book did or has not yet done: credit (deposit) or debit (withdrawal).
4Classify the cause: timing difference (cheque not yet presented or cleared), bank-only entry (charges, interest, direct deposit, dishonour) or error.
5State the effect on each balance: does it make the pass book higher or lower than the cash book, or the cash book higher or lower than the pass book?
6Write one line of reason for each item so the examiner sees your logic.
7If needed, record bank-only items in the cash book; timing items need no entry.

Quickest way: Who knows first?

When to use it: Use this for fast classification of items in a short question or MCQ.

Ask: who knew about this first, you or the bank?
If you knew first (cheque issued, cheque deposited), it is a timing item. Your cash book has it, the pass book does not.
If the bank knew first (charges, interest, direct credit, dishonour), the pass book has it. Your cash book does not.
Timing items need no cash book correction. Bank-only items need a cash book entry.
Errors: correct the book that made the mistake.

Common mistakes in Causes of Difference Between Cash Book and Pass Book

Treating a cheque issued but not presented as an item in the pass book only.
Students confuse who has recorded it.
Fix: You issued the cheque, so your cash book already has it. The pass book will show it only after the payee presents it.
Saying deposit in cash book is a credit.
Students copy the pass book view, where a deposit is a credit.
Fix: In your cash book, bank receipts are debits. In the pass book they are credits. The two books are mirror images.
Passing a cash book entry for cheques not presented or not cleared.
Students think every difference needs correcting.
Fix: These are timing differences. They fix themselves once the bank acts. Only bank-only items and errors need entries.
Forgetting to reverse a dishonoured cheque in the cash book.
The cheque was entered as a receipt, so students assume it is final.
Fix: When the bank returns it, credit the bank column in your cash book and debit the customer's account.
Mixing up bank charges with interest allowed by the bank.
Both are bank-only items and look alike.
Fix: Charges and overdraft interest are debits in the pass book (reduce your balance). Interest earned on deposits is a credit (raises your balance).

Worked examples

Example 1

On 31 March, the cash book of Mehta Traders shows a bank balance of ₹48,000 (debit). Cheques of ₹6,000 issued to suppliers have not been presented. Cheques of ₹4,000 deposited have not been cleared. Explain the difference and find the pass book balance.

Show the solution

Cheques issued but not presented: cash book has already reduced by ₹6,000. The pass book has not. So the pass book is ₹6,000 higher.
Cheques deposited but not cleared: cash book has already added ₹4,000. The pass book has not. So the pass book is ₹4,000 lower.
Pass book balance = ₹48,000 + ₹6,000 − ₹4,000 = ₹50,000.

Answer: The pass book balance is ₹50,000 (credit). Both differences are timing differences and need no cash book entry.

Example 2

Sharma & Co. finds that its cash book bank balance is ₹30,000 (debit). The pass book shows a different figure. Reasons: bank charges ₹500 not entered in the cash book; ₹2,500 interest credited by the bank not entered in the cash book; a customer paid ₹3,000 directly into the bank and this is not in the cash book. Classify each item and find the pass book balance.

Show the solution

Bank charges ₹500: the bank debited it, the cash book has not. Cash book is ₹500 higher than the pass book.
Interest ₹2,500: the bank credited it, the cash book has not. Cash book is ₹2,500 lower than the pass book.
Direct deposit ₹3,000: the bank credited it, the cash book has not. Cash book is ₹3,000 lower than the pass book.
Pass book balance = ₹30,000 − ₹500 + ₹2,500 + ₹3,000 = ₹35,000.
All three are bank-only items. Sharma & Co. should enter them in the cash book: credit ₹500, debit ₹2,500 and ₹3,000.

Answer: The pass book balance is ₹35,000 (credit). All three items are bank-only entries and must be recorded in the cash book.

Exam tips

Write the cause, the book that has the entry and the effect on the balance for each item. Examiners give marks for the reason, not just the figure.
In short answers, group causes under three heads: timing differences, bank-only items and errors.
Always state that cheques not presented or not cleared need no cash book entry.
In OMR-style questions, check if the balance is debit or credit in each book before choosing an option.
Learn the mirror-image rule: a cash book debit balance equals a pass book credit balance.

Practice questions from Bank Reconciliation Statement

Causes of Difference Between Cash Book and Pass Book in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Causes of Difference Between Cash Book and Pass Book: frequently asked questions

Why do the cash book and pass book balances differ?

They differ because of timing differences, bank-only entries and errors. Timing differences arise when cheques are issued or deposited but not yet presented or cleared. Bank-only entries include charges, interest, direct deposits and dishonoured cheques.

What does cheque issued but not presented for payment mean?

You have issued a cheque and recorded it in your cash book, but the payee has not yet taken it to the bank. The bank has not debited your account, so the pass book balance is higher than the cash book balance.

What are cheques deposited but not yet collected in a BRS?

These are cheques you have recorded as receipts, but the bank has not credited to your account yet. The cash book shows them, but the pass book does not. The pass book balance is lower for now.

Which items appear in the cash book but not in the pass book?

Cheques issued but not yet presented and cheques deposited but not yet cleared appear in the cash book only. Errors made by you may also appear only in the cash book.