BANK PASS BOOK

MEANING OF BANK PASS BOOK:
         Passbook or Bank Statement is a copy of the account of the customer as it appears in the bank’s books. When a customer deposits money and cheques into his bank account or withdraws money, he records these transactions in the bank column of his cashbook immediately.

Correspondingly, the bank records them in the customer’s account maintained in its books. Then they are copied in a passbook and given to the customer. With the computerization of banking operations, bank statements (in lieu of passbook) are issued to the customers periodically.

Thus passbook is a record of the banking transactions of a customer with a bank. All entries made by a customer in his cashbook (bank column) must be entered by the bank in the passbook.

Hence, the balances as per bank column of the cashbook must agree with the balance as per passbook. Of course the balances will be equal and opposite in nature. For example, if the cash book shows a debit balance of Rs.5000, then the passbook must show a credit balance of Rs.5000 and vice versa. But in most cases, these two balances may disagree on account of various reasons.

Format of a Bank Passbook or Bank Statement:

Name of the bank__________

Address of the bank____________

Account No._________________

Customer Name:_______________

Address of the customer.___________

Causes for Disagreement:

The major cause for the disagreement is that certain items have been entered in one book only (i.e., cash book or pass book only). In other words certain debits or credits made in one book (say in cashbook) are omitted to be entered in the other book (say in passbook) and vice versa.

Such items may be listed as follows:

1. Cheques sent for collection or deposited into the bank but not yet collected. When a customer deposits cheques into bank, he makes entries (debit bank account) immediately in his cashbook.

But the bank will credit the customer account in the passbook only when the cheques are realized. In that case the balances will disagree and cashbook balance will be more than the passbook balance.

2. Cheques issued by the customer but not presented to the bank for payment. When a customer issues cheques to his suppliers/creditors, he will enter the transaction (credit bank account) immediately in his cashbook.

But the banker will debit customer account only when the suppliers/creditors present the cheques for payment. Due to this gap, the two balances will disagree and cashbook balance will be more than the passbook balance.

3. Bank charges and interest on overdraft are first debited in the passbook and recorded in the cashbook afterwards. This will cause for the disagreement and cashbook balance will be more than the passbook balance.

4. Interest on bank credit balance and interest on investment, dividends, etc., and bills collected by the bank on behalf of the customer are first credited in the passbook and recorded in the cashbook later on.

This makes the two balances to disagree and cashbook balance will be less than the passbook balance.

5. Items like direct payments made by the bank as per standing instructions of the customer and dishonor of a bill discounted with the bank, etc., are first debited in the passbook and recorded in the cashbook later on.

This will make the two balances to disagree and cashbook balance will be more than the passbook balance.

6. Commitment of errors such as errors of omission or commission or in casting, carry forward, balancing, etc either in the passbook or cashbook or in both will cause for the disagreement in these two balances.