1. Meaning
A statement prepared to reconcile the difference between the bank balance shown by the Cash Book and the Bank Pass Book.
Note: It is generally prepared by the account holder (customer), not the bank.
2. Causes of Difference
- Timing Differences: Checks issued but not presented, checks deposited but not collected.
- Direct Transactions by Bank: Interest allowed, bank charges, direct deposits by customers, direct payments (insurance premium).
- Errors: Errors in recording in Cash Book or Pass Book.
3. Method of Preparation
Start with a balance (e.g., Debit Balance as per Cash Book) and adjust items to reach the other balance (Credit Balance as per Pass Book).
Favorable Balance: Debit in Cash Book / Credit in Pass Book.
Unfavorable (Overdraft) Balance: Credit in Cash Book / Debit in Pass Book.