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CSEET · Fundamentals of Accounting · Bank Reconciliation Statement

A cheque issued by a firm to a supplier has been entered in the cash book but the supplier has not yet presented it to the bank. How will this item affect the comparison of the two balances?

The pass book balance will be higher than the cash book balance. The firm reduced its cash book on issuing the cheque, but the bank deducts the amount only when the cheque is presented for payment, so the pass book remains higher until presentation.

  1. AThe pass book balance will be higher than the cash book balance because the bank has not yet deducted the amountCorrect
  2. BThe pass book balance will be lower than the cash book balance because the bank has already deducted the amount
  3. CThe cash book balance will be higher than the pass book balance because the cash book has not yet recorded it
  4. DBoth balances will remain equal because the cheque is a non-cash item

Explanation

The firm has credited the bank column in the cash book on issuing the cheque, so the cash book balance is already reduced. The bank deducts only when the cheque is presented, so the pass book still shows the higher balance. Option B reverses the timing, as the bank has not yet paid.

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