Question

When the pass book balance is taken as the starting point, items which makes the pass book balance ____________ than the balance in the cash book must be deducted for the purpose of reconciliation.

• A. lower
• B. higher
• C. equal
• D. None of the above

Answer 1

The correct option is B higher

Suppose the pass book balance is $Rs.50000$ and the balance in the cash book is $Rs.48000$ the only different entry being the bank interest of $Rs.2000$ which is credited in the passbook. Now this entry was not included while preparing the cash book and so during reconciliation if pass book balance is the starting point then this amount of bank interest would have to be deducted so as to reach the cash book balance, because the pass book balance is higher in this case and it is due to the bank interest received.