Which of the following is/are the reason(s) for difference between Cash Book…

Bank reconciliation exists because a business's Cash Book and the bank's Passbook do not update for every transaction at the same moment. Differences between the two fall into two recognized categories: (1) timing differences — amounts the business has already recorded but the bank has not yet processed (e.g., cheques deposited but awaiting clearance, or cheques issued but not yet presented), and (2) bank-originated entries — amounts the bank records first because only the bank has visibility into them (e.g., interest credited, dividends collected on the customer's behalf, bank charges, or standing-instruction debits), which reach the Cash Book only once the customer sees the statement.

• Statement I — cheques paid into the bank but not yet collected: the business enters this as soon as the cheque is deposited, but the bank credits the account only after the cheque clears the collection process. This is a timing difference of category (1).

• Statement II — interest and dividends collected by the bank: the bank credits this amount to the account as soon as it receives it, before the business has any record of it. This is a bank-originated entry of category (2).

A standard bank reconciliation statement, whether started from the Cash Book balance or the Passbook balance, lists 'cheques deposited but not yet cleared' and 'interest/dividends credited by the bank but not yet entered in the Cash Book' as two separate adjustment lines — confirming both are independently recognized causes of difference, not two versions of the same cause.

Since both I and II are genuine, independent reasons for the Cash Book–Passbook difference, the correct option is 'Both I and II'.