Learning objectives of this article:
- What are the causes of disagreement
between cash book and pass book?
Contents:
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. |