Read the given below two statements and mark the correct answer.

Assertion (A): The business firm periodically prepares a bank reconciliation statement to reconcile the bank balance as per the cash book with the passbook as these two show different balances for various reasons.
Reason (R) : Cheques issued but not presented for payment will reduce the balance as per the passbook.

Assertion (A) is true but Reason (R) is False

The correct answer is option 3- Assertion (A) is true but Reason (R) is False.

Assertion (A): The business firm periodically prepares a bank reconciliation statement to reconcile the bank balance as per the cash book with the passbook as these two show different balances for various reasons. THIS IS TRUE. Bank Reconciliation Statement is prepared to reconcile the bank balance as per cashbook with the balance as per bank passbook. The reason for differences are ascertained and prepared in the statement.

Reason (R) : Cheques issued but not presented for payment will reduce the balance as per the passbook. THIS IS FALSE. When cheques are issued by the firm to suppliers or creditors of the firm, these are immediately entered on the credit side of the cash book. However, the receiving party may not present the cheque to the bank for payment immediately. The bank will debit the firm’s account only when these cheques are actually paid by the bank. Hence, there is a time lag between the issue of a cheque and its presentation to the bank which may cause the difference between the two balances. Thus, it will increase the balance as per passbook.