Question

A bank reconciliation statement is prepared with the balance of __________.

• A. Pass book
• B. Cash book
• C. Both pass book and cash book
• D. None of the above

Answer 1

The correct option is C Both pass book and cash book

To reconcile means to find out the differences if any between two or more things and eliminate it. Now, in case of any banking transactions for each deposit or withdrawal the entry is recorded at two places.

• The pass book maintained by the bank and
• The cash book maintained by the account holder.

These two books are opposites of each other which means if one shows credit balance then the other would reflect a debit balance of the exact same amount. But due to reasons like timing differences the balances of both these books do not match.

So, to reconcile the same a bank reconciliation statement is prepared. The aim while preparing a bank reconciliation statement is to take either pass book or cash book balance as the starting point, to add or deduct certain entries and reach the balance of the other book ie, if cash book balance is the starting point then after reconciling we should reach at pass book balance.