List five 5 reasons for disagreement between the cash book and bank statement
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Some of the reasons for a difference between the balance on the bank statement and the balance on the books include: Show
How to Document the DifferencesAny items that are already recorded in the company's general ledger accounts, but have not yet appeared on the bank statement (outstanding checks, deposits in transit), will be noted as an adjustment to the balance per bank statement. Outstanding checks are a deduction to the balance per bank; deposits in transit are an addition to the balance per bank. If an item is on the bank statement but has not yet been entered on the books, the items are noted as an adjustment to the balance per books. Bank service charges, check printing charges, and other electronic deductions that are not yet recorded in the company's accounts will become deductions from the cash balance per the books. Electronic deposits not yet recorded by the company will become additions to the cash balance per books. When a check is issued to a creditor, it is recorded on the credit side of the cash book in bank column. The bank will record it on the date when it is paid. In most of the cases a check cannot be presented for the payment by the creditor on the date on which it is drawn. So long the check is not presented to the bank, the cash book balance and the pass book balance will differ. When a check is received from a debtor, it is recorded in the cash book on the date when it is deposited with the bank for collection. But the bank will record it in depositor's account on the ate when it is actually collected by the bank from the concerned bank. So long the bank cannot collect the amount, the cash book balance and pass book balance will disagree. Sometimes the debtors deposit the amount directly to our bank a/c instead of paying cash to us. In such a case the bank will transfer the amount to our account and sends us an intimation of this transaction. But usually, there is some delay in receiving this information from the bank. So long the intimation is not received by us, the cash book balance and the pass book balance will disagree. For this, the cash book will show less balance and the pass book will show more balance. Sometimes the bank collects and credits our account with dividend on shares, interest on govt. securities etc. as per our instructions and sends an intimation to us. But it takes a few days to receive this intimation from the bank and we record it in cash book on the date of receipt of this intimation. For this, the cash book will show less balance and the pass book will show more balance. The bank allows us interest on our deposits and credits the amount of interest to our account and sends intimation to us On receipt of the intimation, we record it in the cash book. So long the information is not received by us, the cash book balance and the pass book balance will not agree. For this, the cash book will show less balance and pass book will show more balance. Sometimes the bank pays insurance premium, factory rent, interest on debentures, trade subscription etc. on our behalf as per standing order. The bank debits our accounts and sends intimation to us. On receipt of intimation for the bank, we record it in our cash book. For this, there will be a disagreement between cash book and pass book. Our account is debited with bank charges and interest on overdraft and intimation is sent to us by the bank. On receiving the intimation from the bank, we record them in the cash book. For this the cash book will show more balance and the pass book will show less balance. In business, errors and omissions are very common. Someone may forget to record something or record it but in a wrong way. The cash book balance and the pass book balance can also disagree if there is an error or mistake in the cash book or in the pass book. The cheques paid into bank for collection but not credited into the account of the customer, because the cheque is i. not collected and credited till that date. ii. collected but the bank staff has forgotten to make entry. iii. collected but credited to wrong account. iv. dishonoured. v. collected for No.I account but credited to No.II account of the same customer. As soon as the cheques are sent to the bank, entries are made in the debit side of the cash book (bank column). But, usually bank credit the customers account only when they have received payment from the bank concerned, in other words, when the cheques have been collected. Hence, there will be a time gap between the depositing of the cheques and the collection by the bank. For example, Bharat Company Limited deposited a cheque on March 28, 2003 for a sum of Rs.3,000. The cheque was collected on April 4, 2003. In case the bank sends a statement of account upto March 31, 2003, there will be a difference of Rs 3,000 between the balance shown by the cash book and the pass book. 2. Cheques issued but not yet presented for payment The cheques issued but not debited customers account may be because the cheque is i. not cashed till date. ii. not presented till date. iii. presented but dishonoured for some reasons or other. iv. lost by the party to whom the cheque was issued. v. cashed out of No.I account but wrongly debited to No.II account of the same customer. In all of the above cases, the entry in the cash book is made immediately on the issue of cheque but naturally the entry will be made by bank only when the cheque is presented for payment. Thus there will be a gap of some days between the entry for issue of cheque in the cash book and the entry for payment made in the pass book. For example, Bharat Company Limited issued a cheque in favour of Mr.Krishna on March 28, 2003 for a sum of Rs.5,000. The cheque is presented for payment at the bank on April 4, 2003. In case, bank sends a statement of account upto March 31, 2003, there will be a difference of Rs.5,000 between the balance as shown by the cash book and the balance as shown by the pass book. 3. Amount credited by the banker in the pass book without the immediate knowledge of the customer The following are some of the examples for the above statement i. The bank might have collected rent, dividend, bills of exchange, interest etc., due for the customer as per standing instructions . ii. Some debtors might have directly paid into bank. iii. Bank credits interest on the credit balance of the customer’s account. iv. The banker has wrongly credited this account instead of some other account. In all the above cases, the entry will be first entered in the pass book. The customer will know this only after he verifies the entries in account for interest amounting to Rs.500 on March 31, 2003. The bank prepares and sends a statement of account on March 31, 2003. 4. Amounts debited by the banker in the pass book without the immediate knowledge of the customer The following are some of the examples for this. i. The banker has recorded bank charges, interest on overdraft etc. ii. The banker has paid insurance premium, subscription for periodicals,etc. on behalf of the customer as per the standing instructions. iii. The banker has wrongly debited this account instead of some other account. iv. The banker has paid the bills payable of the customer as per standing instructions . v. Dishonour of a cheque deposited and discounted bills receivable In all the above cases, the entry will be first entered in the pass book of the customer. And the customer will know only after he verifies the entries in the pass book or statement of account . So there may be a time gap of some days before the customer includes the entries made in the pass book. For example, the bank has debited Bharat Company Limited’s account for its charges amounting to Rs. 250 on March 31,2003. In case, the bank sends a statement of account upto March 31,2003, there will be a difference of Rs.250 between the balance as per the cash book and the balance as per the pass book. For example, A cheque for Rs.5,000 dishonoured on March 28, 2003. In case, the bank sends a statement of account upto March 31, After tracing the various items of differences, a Bank reconciliation statement is prepared by starting with the balance shown by any of the two books. But in actual practice, a Bank reconciliation statement is prepared by the customer starting with the balance as per cash book and will ensure that the balance as per pass book is arrived at. What are the reason for disagreement between cashbook and bank statement?Errors in the books. Errors by the bank. Electronic charges on the bank statement are not yet recorded in the books. Electronic deposits on the bank statement that are not yet recorded in the books.
What are the causes of differences in bank reconciliation statement?Reconciliation of the cash book and the bank passbook balances amounts to an explanation of differences between them. The differences between the cash book and the bank passbook is caused by: timing differences on recording of the transactions. errors made by the business or by the bank.
Which of the following is not a reason for the disagreement between cash book balance and bank statement balance Mcq?Cash deposited and cleared is not a cause of difference in balances as per pass book and as per cash book.
What appears in bank statement but not cash book?The bank only records such a cheque when it is paid by thebank, which may be several days later. (3) Items such as interest may appearon the bank statement but are not recorded in the cash book as thecashier is unaware that they have arisen.
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