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CSEET · Fundamentals of Accounting · Bank Reconciliation Statement

Mehta Traders issued a cheque for ₹8,000 to a supplier on 28 March, which was recorded in the cash book but not presented to the bank until 3 April. On 31 March, the reason for the difference between the two balances, as far as this cheque is concerned, is best described as:

The difference is a timing difference. The firm recorded the cheque when issued, but the bank will debit the account only when the cheque is presented. No correction is needed in the cash book; the item is simply shown in the reconciliation.

  1. AA timing difference, as the bank has not yet debited the amountCorrect
  2. BAn error of principle in the cash book
  3. CA bank error that must be reported to the bank
  4. DA permanent difference that needs a journal entry in the cash book

Explanation

The cheque was entered in the cash book on issue but the bank will record it only when presented. This is a timing difference, requiring no cash book correction. Treating it as an error or journal entry (option 3) is wrong because the cash book is already correct.

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