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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cash Book, Bank Book, Petty Cash Book, Bank Reconciliation Statement

A cheque of Rs 2,500 received from a customer and deposited was dishonoured by the bank, and the passbook shows it as a debit. The cash book has not yet recorded the dishonour. What is the correct treatment in the cash book?

Credit the bank column with Rs 2,500 and debit the customer's account. A dishonoured cheque reverses the earlier receipt, reducing the bank balance and reviving the customer's debt to the business.

  1. ACredit the bank column with Rs 2,500 and debit the customer's accountCorrect
  2. BDebit the bank column with Rs 2,500 and credit the customer's account
  3. CMake no entry because the passbook already shows it
  4. DCredit the bank column with Rs 2,500 and credit the customer's account

Explanation

Dishonour reverses the original receipt: the bank balance falls, so the bank column is credited, and the customer again owes the money, so the customer's account is debited. Option B repeats the original entry.

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