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CA Foundation · Accounting · Bank Reconciliation Statement

Why can the balance in the cash book (bank column) differ from the balance in the pass book even when no errors have been made by either party?

Even without errors, the two balances can differ because of timing differences: the firm records cheques issued or deposited immediately, while the bank records them only when the cheques are presented or collected. Items like unpresented cheques and uncleared deposits therefore cause a temporary difference between the records.

  1. ABecause of timing differences, such as cheques issued but not yet presented and cheques deposited but not yet collectedCorrect
  2. BBecause the pass book is maintained on the cash basis and the cash book on the accrual basis
  3. CBecause the bank always records transactions a month earlier than the firm
  4. DBecause the cash book follows double entry and the pass book does not

Explanation

Both records may be correct yet differ because transactions are recorded by the firm and the bank at different times, for example cheques issued but not presented or cheques deposited but not yet credited. The other options give incorrect reasons.

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