In 100 words or fewer, explain why there may be a difference between the bank statement ending cash balance and the ending balance in the Cash account. Give at least two examples of adjustments to the bank balance and the book balance.

The bank reconciliation statement removes the difference between cash balance and bank balance.

The bank statement and cash account balance are different due to timing differences. Timing difference means a delay in recording the transactions. These differences are solved by preparing a bank reconciliation statement.

Three examples of timing differences:

1. When the cash is deposited in the bank, it is immediately recorded in the cash account, but the bank takes two to three days to record it. Hence. This will cause a difference in recording the deposit. To correct this, the deposit is added to the opening balance of the bank balance.
2. EFT cash receipts by the banks before a company records them. Hence the cash account shows less balance than the bank balance.
3. When the company issues a check to someone, the company immediately deducts the amount in the cash account, but the bank takes a few days to clear that check. The outstanding checks are removed from the bank balance to solve this difference.