Balance per Cash Book and Bank Statement

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 22, 2023

If bank deposits made by an account holder exceed withdrawals:

  • The account holder's bank statement will show a credit balance (credit column exceeding debit column, resulting in a net liability for the bank).

Similarly, in the event of an overdraft, the cash book would show a credit balance, but the bank statement would show a debit balance.

Except for the above fact, under normal circumstances, if both the bank and account holder have kept their books properly, the cash book and the bank statement should show identical balances.

That is to say, the amount of the balance will be the same while it is on different sides of the ledger.

Causes of Disparities in Balances per Cash Book and Bank Statement

In practice, the balance in the cash book rarely agrees with the balance in the bank statement. The following are the reasons why disparities may exist between the two.

Bank Statement Entries May Not Appear in Cash Book

Some entries that may have been made by the bank in the bank statement may not appear in the account holder's cash book. These include:

1. The notification of bank charges may have been sent by the bank before the month-end but may have been received by the account holder after the month-end.

2. Checks deposited by the account holder may have been returned unpaid.

A bank immediately notifies the account holder if any check is returned unpaid, but such a notification may reach the account holder after the month-end, particularly if the check was returned in the last few days of the month.

3. A deposit is received for the account holder directly by the bank. The account holder may, in many cases, learn of such a direct deposit only on receipt of their monthly statement.

4. A payment is made by the bank on behalf of the account holder without the latter issuing a check (e.g. standing order payments for rent or insurance premiums).

Cash Book Entries May Not Appear in Bank Statement

Some entries that may have been made by the account holder in their cash book may not appear in the bank statement. These include:

1. Checks issued by the account holder to their suppliers may not have been presented to the bank for payment by the last day of the month to which the bank statement relates.

Banks would obviously show only those checks on the bank statement that have actually been presented to them and paid by them on behalf of the account holder.

2. Checks deposited, particularly on the last day of the month, may not be credited by the bank until they are collected from the drawee's bank.

Month-end Procedure

At the end of each month, the cash book is not balanced until a bank statement is received from the bank.

The two are carefully compared and a list is prepared that contains all those items that may be present in one and missing from the other.

After this is done, all those items that are present in the bank statement but are missing from the cash book are entered into the cash book on the last date of the month. The cash book is then balanced.

If the cash book's balance still differs from the one shown on the bank statement, the difference must be due to the entries present in the cash book but missing from the bank statement.

An account holder has no authority to amend bank records, nor will the bank agree to alter its

statement unless the un-presented checks have been presented, or the uncollected checks collected.

For this reason, the only recourse is to prepare a statement to reconcile the balance shown by the cash book to the balance shown by the bank statement. Such a statement is known as a bank reconciliation statement.

Balance per Cash Book and Bank Statement FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.