Differences caused by Errors : Sometime the difference between the two balances may be accounted for due to wrong entries made by businessman or bank.
Errors Committed by Bank in Recording the Transactions : Omission or wrong recording of transactions relating to cheque deposited and wrong totalling etc. Committed by the bank, while posting entries in the pass book also cause differences between pass-book and cash-book balance. Bank cheques debited by the bank in firm's current account is an example of such error.

Three causes of difference in the bank balance shown by Cash Book and Pass Book.
These are discussed below :
(i) Transactions shown in Cash Book Only:
(a) Cheques issued but not yet presented in the bank for payment.
(b) Cheques deposited into bank but not yet credited or collected.
(c) Cheques deposited into bank, but dishonoured.
(ii) Transactions shown in Pass Book Only:
(a) Interest allowed or credited by bank.
(b) Interest charged or debited by bank.
(c) Bank charges and commission charged by the bank.
(d) Direct deposit into the bank by a customer.
(e) Payments made by the bank as percustomer's standing instructions.
(f) Payments collected by the bank.
(g) Billscollected by the bank on behalf of the customer.
(h) Dishonour of a bill discounted with the bank.
(iii) Errors : It may be possible that while recording transactions in the Cash Book, the accountant might have committed some errors. Errors may also be committed by the bank in the firm's account. These error will also cause difference in bank balance shown by Cash Book and the Pass Book

Preparation of bank reconciliation statement is important due to the following reasons:
(i) Reconciliation helps the management in checking the accuracy of entries recorded in Cash Book.
(ii) It helps in keeping the track of cheques, etc., sent to the bank for collection. Any undue delay in the clearance of cheques can be noticed.
(iii) It helps in bringing out any errors that may have been committed either in Cash Book or in the Pass Book.
(iv)Aregular reconciliation discourages the staff of the firm or of the bank from embezzlement of funds.