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Bank reconciliation means some of the transaction entered in the cash book not in the pass book and

some transaction entered in the pass book not in the cash book. In other words we can say that always opposite entry in cash book and pass book. The bank pass book indicates the amount paid into the bank and the amount withdrawn there form. The pass book balance or any given data must be the same as the balance shown by the bank column of the cash book on the same date.The reason responsible for the difference may be delay in intimation, time gap between recordings of transaction in cash book and pass book due to errors and omissions in cash book and pass book. Reasons of difference between cash book & pass book balance: Cheque issued but not presented for payment: When cheque are issued then immediately make entry in the cash book. The cheque issued can be presented for payment to the bank within six month from the date of cheque as per banking law. The cheque are presented for payment after the expiry of the above period then payment is refused by the bank. This cheque is also known as stale cheque. It is posssible at the time when the balance of the two books are being compared, thus more chances of causing a disagreement b/w the two balances. Cheque paid into the bank but not yet cleared: As soon as the cheque are deposited into the bank, the immediately entry is passed in the cash book. This will make entry in pass book only when cheque are cleared. It is posssible at the time when the balance of the two books are being compared, thus more chances of causing a disagreement b/w the two balances. Interst allowed by the bank: Bank might have credited the account of the customer with the interest and may have made the entry in the pass book. It is possible that the entry of such interest may not have been made by the customer in the cash book, thus causing a disagreement b/w the two balances. Interest and Bank charges debited by bank: Sometime bank charges interest from the customer then immediately entry in the pass book but not in cash book. so, in this case when check the balance b/w cash and bank book then disagreement b/w the two balances. So, it is the main reason to create difference b/w two books. Interst, dividend collected by the bank: sometime interest on government security or dividend on share is collected by the bank and is credited to customer account. If the entry does not appear in the cash book then balance will differ. Direct payment by bank: Sometimes, understanding instruction from the clients certain payment like insurance premium, club fees instalment etc. are made by the bank. then this entry is recorded only in the pass book. This entry is made in the cash book only when the necessary intimation to that effect is received from the bank by the client. The entries in the cash and pass book may be on different dates. Direct payment into the bank by a customer: Sometimes, our customer deposit money direct into the account in the bank. It is only recorded in the pass book not in the cash book. It is posssible at the time when the balance of the two books are being compared, thus more chances of causing a disagreement b/w the two balances.

Dishonour of bill discounted with the bank: Sometimes, customer get their bills discounted with the bank. If the bank is not able to get payment of these bills on the due date. it will debit the customer account with the amount of the bills together with the nothing charges if any.The customer will pass the entry in the cash book only. when balance of the two books are being compared, thus more chances of causing a disagreement b/w the two balances. Dishonour of cheque: When the received cheque are deposited into bank, these are immediately recorded in the cash book. As a result cash book balance is increased. but the deposited cheque is dishonoured due to lack of funds or due to other reasons. Bank doesnot credit the amount of the depositor. as a result disagreement b/w the two balances. Error and ommissions: If any error is committed either by the bank or by a customer in the cash book While recording a transaction in their respective books, it causing a disagreement b/w the two balances. the error may be: undercast/overcast of receipt side or payment side. bank charges omitted from the banks or recorded twice in the books. wrong carry forward of cash book balance.