Banks provide customers with a pass book that shows all transactions with the bank. The pass book balance may differ from the customer's cash book balance for various reasons. To identify the causes of any disagreement between the balances, the customer must prepare a bank reconciliation statement. This statement reconciles the cash book balance to the pass book balance by listing items that have been recorded in one book but not yet in the other, such as outstanding checks or deposits. Preparing the bank reconciliation statement ensures the customer knows the accurate bank balance.

1. • Banks usually give their customers, a true copy
of their accounts with them. The copy of the
account of a customer given by the bank
showing his transactions with it is known as the
pass book.
• All receipts for the customer are credited in the
pass book and all payments for him are debited
in it.

2. A bank reconciliation statement is a
statement prepared by the customer
of a bank showing the causes of
disagreement between the balances
as per his cash book and pass book
as on a particular date.
It is prepared to bring the cash book
balance in agreement with the
balance as per pass book.

3. Need and importance of
Bank Reconciliation
Statement.

4. • If the bank balance shown by the cash book
does not agree with the balances as per pass
book, the trader has to identify the reasons for
the difference .
• This is possible only by preparing a Bank
Reconciliation Statement.
• In the absence of a bank reconciliation
statement, the customer is not sure of the
correctness of bank balance shown by the cash
book.

5. • 12 causes of difference
between Cash Book and Pass
Book balance

6. 1. Cheque issued but not presented
for payment: When the trader issues
a cheque , he credits its amount
immediately in his cash book.
The same will be debited in the pass
book only on presenting the cheque
and making payment by the bank.

7. • 2) Cheque paid in for collection but
collected: on depositing the cheque in
the bank the trader debits the same
amount in his cash book bank column.
• The bank credits the amount in pass book
only on getting the amount collected.

8. 3. Direct payment by a customer to the bank
4. Interest on deposit credited by the banker
5. Interest, dividend rent etc collected by the bank.
6. Payments made on behalf of the customer
7. Bank charges as per pass book
8. Bills receivable discounted, but dishonored
9. Interest on overdraft debited in the pass book
10. Bills, promissory notes etc collected and
credited in the pass book.
11 Cheque deposited for collection but omitted to
be recorded in the cash book.