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In previous chapter, we have learnt that the business organisations keep a record of their cash and bank transactions in a cash book. Both the cash and bank account entries are made in the cash book and it shows the balance of both at the end of the period. Once the cash book has been balanced, it is a usual procedure to check its details with the records of the firm's bank transactions as recorded by the bank. A bank statement or a bank passbook is a copy of a bank account as shown by the bank records. This facilitates the bank customers to check their funds in the bank regularly and update their own records of transactions that have occurred. The balance shown in the passbook must tally with the balance as shown in the cash book. In actual practice, these are usually found to be different. So, we have to determine the causes for such difference. The usual procedure observed is that a bank statement shows all deposits in the credit column and withdrawals in the debit column. Thus, if deposits exceed withdrawals it shows a credit balance and if withdrawals exceed deposits it will show a debit balance (overdraft).

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