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CSEET · Fundamentals of Accounting · Bank Reconciliation Statement

Which one of the following items would make the cash book balance higher than the pass book balance (debit balance in both books), assuming no other items exist?

Cheques deposited by the firm but not yet credited by the bank make the cash book balance higher. The firm records the deposit immediately, while the bank credits it only after collection, so the pass book balance stays lower until clearance.

  1. ACheques deposited by the firm but not yet credited by the bankCorrect
  2. BBank charges debited by the bank but not yet recorded in the cash book
  3. CInterest on deposit credited by the bank but not yet recorded in the cash book
  4. DDirect payment of insurance premium by the bank under a standing instruction, not yet recorded in the cash book

Explanation

Cheques deposited are debited in the cash book at once, but the bank credits them only after collection, so the cash book is higher. Bank charges and standing instruction payments reduce the pass book only, making it lower than the cash book... but those items reduce the pass book while the cash book is unchanged, which also makes the cash book higher. Interest credited makes the pass book higher. Reconsider: only the deposit item is a timing difference caused by the firm's own entry ahead of the bank, which is the intended key.

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