Reasons for Differences Between Cash Book & Pass Book
Let's understand ALL possible reasons why your Cash Book and Pass Book show different balances.
Category 1: Timing Differences (Most Common)
1. Cheques Issued but Not Yet Presented
What happens:
- You issue a cheque to supplier
- You immediately record in Cash Book (Credit Bank column)
- Supplier deposits it 5 days later
- Bank deducts money only when cheque is presented
Effect:
- Cash Book: Reduced immediately
- Pass Book: Reduced later (when presented)
- Cash Book < Pass Book (temporarily)
Example: Issued cheque ₹10,000 on Apr 25, supplier deposited on May 02.
- Apr 30 Cash Book: Shows ₹10,000 less
- Apr 30 Pass Book: Still shows full amount
2. Cheques Deposited but Not Yet Cleared/Collected
What happens:
- You deposit a cheque received from customer
- You record in Cash Book (Debit Bank column)
- Bank takes 2-3 days to clear it
- Money credited only after clearance
Effect:
- Cash Book: Increased immediately
- Pass Book: Increased later (after clearing)
- Cash Book > Pass Book (temporarily)
Example: Deposited cheque ₹15,000 on Apr 28, cleared on May 01.
- Apr 30 Cash Book: Shows ₹15,000 more
- Apr 30 Pass Book: Doesn't show it yet
Category 2: Items in Pass Book Only
3. Bank Charges / Service Charges
What happens:
- Bank deducts charges for services (SMS, cheque book, etc.)
- Appears in Pass Book
- You don't know until you see Pass Book
Effect: Pass Book < Cash Book
Example: Bank charged ₹200 for SMS alerts.
4. Interest Charged by Bank (on Overdraft)
What happens:
- If you have overdraft, bank charges interest
- Debited in Pass Book
- You record it later
Effect: Pass Book < Cash Book
5. Interest Allowed/Credited by Bank
What happens:
- Bank credits interest on your balance
- Appears in Pass Book
- You record it later
Effect: Pass Book > Cash Book
Example: Bank credited ₹500 interest.
6. Direct Deposit by Customer
What happens:
- Customer directly deposits money in your bank account
- Bank records it
- You don't know until informed
Effect: Pass Book > Cash Book
Example: Customer paid ₹20,000 directly to bank.
7. Direct Payment by Bank (Standing Instructions)
What happens:
- Auto-debit for insurance, loan EMI, etc.
- Bank deducts as per instructions
- You record it later
Effect: Pass Book < Cash Book
Example: Insurance premium ₹5,000 auto-debited.
8. Dishonor of Cheque
What happens:
- You deposited customer's cheque
- You recorded it in Cash Book
- Cheque bounced (insufficient funds)
- Bank reverses the entry
Effect: Pass Book < Cash Book
Example: Deposited ₹10,000 cheque, it bounced.
9. Dividend/Interest Collected by Bank
What happens:
- Bank collects dividend on your shares
- Credits your account
- You record it later
Effect: Pass Book > Cash Book
Category 3: Errors
10. Wrong Entry in Cash Book
Example: Recorded ₹5,000 as ₹500 in Cash Book.
11. Wrong Entry by Bank
Example: Bank credited ₹10,000 to wrong account.
Summary Table
| Reason | Cash Book | Pass Book | Difference |
|---|---|---|---|
| Cheque issued not presented | Reduced | Not reduced | CB < PB |
| Cheque deposited not cleared | Increased | Not increased | CB > PB |
| Bank charges | Not reduced | Reduced | CB > PB |
| Interest credited | Not increased | Increased | CB < PB |
| Direct deposit | Not increased | Increased | CB < PB |
| Standing instruction payment | Not reduced | Reduced | CB > PB |
| Cheque dishonored | Not reduced | Reduced | CB > PB |
How to Handle Each in BRS
Starting from Cash Book Balance:
| Item | Action in BRS |
|---|---|
| Cheque issued not presented | Add |
| Cheque deposited not cleared | Deduct |
| Bank charges | Deduct |
| Interest credited | Add |
| Direct deposit | Add |
| Standing instruction | Deduct |
| Dishonored cheque | Deduct |
Quiz
Test Your Knowledge
Question 1 of 5
1. Cheque issued but not presented will make:
💡 Final Wisdom: "Most differences are timing issues, not errors. The money is there, just playing hide and seek between your books and the bank!"