Reasons when cash book balance will be lower than balance as per bank statement or bank pass book:

There are several reasons why the cash book balance may be lower than the balance as per the bank statement or bank pass book. These reasons can be categorized as follows:

1. Bank Charges and Fees:
- Banks often charge various fees and charges for their services, such as account maintenance fees, transaction fees, overdraft charges, etc.
- These charges are deducted directly from the bank account without prior notice to the account holder.
- As a result, the cash book balance may be lower than the balance as per the bank statement, as these charges are not recorded in the cash book until the bank statement is received.

2. Outstanding Checks:
- Outstanding checks refer to those checks issued by the account holder but have not yet been presented to the bank for payment.
- The cash book records these checks as payments, but until they are presented and cleared by the bank, they do not appear in the bank statement.
- Therefore, the cash book balance will be lower than the balance as per the bank statement, as the outstanding checks are yet to be deducted from the bank account.

3. Bank Errors:
- Banks are not immune to making mistakes, and these errors can result in discrepancies between the cash book balance and the bank statement balance.
- Bank errors can include incorrect recording of deposits, withdrawals, or bank charges, as well as misplacement of funds.
- When such errors occur, the cash book balance may be lower than the balance as per the bank statement.

4. Unrecorded Transactions:
- Unrecorded transactions refer to those transactions that have taken place but have not yet been recorded in the cash book.
- These transactions may include bank transfers, direct deposits, or electronic payments that have not been updated in the cash book.
- As a result, the cash book balance will be lower than the balance as per the bank statement, as these transactions are missing from the cash book.

In conclusion, there are several reasons why the cash book balance may be lower than the balance as per the bank statement or bank pass book, including bank charges and fees, outstanding checks, bank errors, and unrecorded transactions. It is essential for businesses and individuals to reconcile their cash book balances with the bank statement regularly to identify and rectify any discrepancies.

1: Interest allowed by the bank:-
Interest allowed by the bank is credited to the firm, but unless intimation is received by the firm from the bank to this effect, no entry is recorded in the bank column of the cash book. The difference in these balances may arise because of the following reasons.

2. Interest and dividend collected by the bank:-
If the bank collects dividend on shares, interest on investments, etc on behalf of its customer, it credits the amount in the passbook. This will increase the balance in the passbook and a difference in the two balances will exits unless a corresponding entry is recorded in the cash book by the firm.

3 .Direct payment through bank:-
An account holder can instruct the bank to make certain payments such as insurance premium, rent of the shop, electricity and mobile bills, loan instalment, etc. on the behalf. The bank will debit the party’s account on making the payment.

4. Direct payment into the bank by a customer:-
If any customer of the firm directly deposits the amount of payment into the bank account of the firm, then credit entry in the passbook will be recorded by the bank. Unless the corresponding entry is recorded in the cash book, the balance of cash book and pass book will differ.