Question

__________ is the reason for bank pass book showing higher balance than Cash book.

• A. Cheque issued but not paid
• B. Cheque deposited but not cleared
• C. Direct payment made by Bank
• D. Interest charged by Bank

Answer 1

The correct option is A Cheque issued but not paid

When a business compares the balance of its cash book with the balance shown by the bank passbook, there is often a difference, which is caused by the time gap in recording the transactions relating either to payments or receipts. Cheque issued by the bank but not yet presented for payment is one reason for bank pass book showing higher balance than cash book. When cheques are issued by the firm to suppliers or creditors of the firm, these are immediately entered on the credit side of the cash book. However, the receiving party may not present the cheque o the bank for payment immediately. The bank will debit the firm's account only when these cheques are actually paid by the bank. Hence, there is a time lag between the issue of a cheque and its presentation to the bank which may cause the difference between the two balances.