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CA Foundation · Accounting · Bank Reconciliation Statement

A cheque for ₹8,000 issued to a supplier was correctly recorded in the cash book, but the bank paid ₹8,000 as ₹800 due to its own error, shown in the pass book. How should this be treated while reconciling?

No cash book entry is required. The business recorded the cheque correctly, and the mistake is in the bank's records, so the bank must rectify it. It is only shown as a reconciling item in the bank reconciliation statement.

  1. ACredit the cash book by ₹7,200 as an adjustment
  2. BDebit the cash book by ₹7,200 as an adjustment
  3. CNo cash book entry is needed; it is a bank error to be corrected by the bank and shown as a reconciling itemCorrect
  4. DDebit the supplier's account by ₹7,200

Explanation

The business recorded the cheque correctly at ₹8,000, so its cash book is right. The error lies in the bank's records and the bank will correct it. In the reconciliation statement it appears as a reconciling item, with no entry in the cash book.

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