bank statement) generally occur because of the following reasons: (i) Timing differences – The different times at which the same items are entered (ii) Errors in recording - Difference arising due to errors in recording the entries (i) Timing differences (a) cheques issued but not yet presented for payment (b) cheques deposited into bank but not yet credited (c) bank charges and interest on loan and overdraft (d) interest and dividends collected by the bank (e) dishonour of cheques and bills (f) amount paid by parties directly into the bank (g) payment made directly by the bank to others (h) bills collected by the bank on behalf of its customer (ii) Errors in recording (a) errors committed in recording the transactions by the business in the cash book (b) errors committed in recording the transactions by the bank. . . Timing differences (a) Cheques issued but not yet presented for payment When the cheques are issued by the business, it is immediately entered on the credit side of the cash book by the business.
But, this may not be entered in the bank statement on the same day. It will be entered in the bank statement only after it is presented with the bank. For example, the balances as per cash book and bank statement are ` , for X & Co. X & Co.
issued a cheque in favour of Y & Co for ` , , on 27th March . So, X & Co’s cash book is credited with ` , on 27th March . But, the cheque is presented to bank on 2nd April . In case, bank sends a statement to X & Co, upto 31st March , it will not contain this transaction.
As a result, there will be a difference of ` , , between balance shown as per cash book and balance as per bank statement. As a result of this, Balance as per bank statement ( ` , ) is more than balance as per cash book Balance as per cash book ( ` , ) is less than balance as per bank statement Accountancy -