Balance as per a cash book is Rs. 5,000 is given. Rs. 3,000 is entered in the cash book as paid into the bank but is not credited by the bank. What is the passbook balance?

Balance as per a cash book is Rs. 5,000 is given. Rs. 3,000 is entered in the cash book as paid into the bank but is not credited by the bank. What is the passbook balance? Correct Answer Rs. 2,000

The correct answer is Rs. 2000

Solution

Bank Reconciliation Statement

Key PointsExplanation of Statements:

1. Favourable balance as per cash book: This is the balance of the amount lying in the bank account as reflected by the company's cashbook. As it is a favourable balance, Rs. 5000 is shown in the plus items column.
2. Cash paid into bank but not credited: Since cash has been deposited into a bank, the entry for the same would have already been passed in the cash book. It’s a receipt therefore the amount should have been debited in the cash book. This will increase the balance in the cash book. Since no amount has been credited to the bank account yet, the balance has not actually increased. To neutralise the effect, the balance has to be decreased from the cash book which can be done by crediting the cashbook. Hence, the amount should be subtracted by placing it in minus Column
3. By finding the difference between the totals of the ‘Plus’ & ‘Minus’ Column, we arrive at balance as per the Passbook i.e., Rs 2000.

Confusion Points

• Debit as per cash book is favourable that denotes deposit of amount but debit as per Passbook is unfavourable that denotes withdrawal from a bank account.
• Credit as per cash book is unfavourable that denotes amount withdrawn but credit as per Passbook is favourable that denotes deposit of amount in a bank account.