The causes of difference which occur because of time lag are given below:
1. Cheques issued but not presented for payment at the bank. The firm/customer issues cheques to its suppliers or creditors. But not all these cheques are presented to the bank. The entry in the cash book is made immediately on issue of the cheque but the bank will not pass an entry until the cheque is presented for payment.
2. Cheques paid or deposited but not collected and credited by the bank. Entry is passed by the firm in the cash book when it receives cheques from its debtors which increase the balance as per the cash book. But the bank credits the firm's account only when they have received the payment from the customer's bank or in other words, once the cheque is collected by the bank.