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CMA Foundation · Fundamentals of Financial and Cost Accounting · Journal and Ledger

A double-column cash book of Sharma & Co. shows an opening cash balance of Rs 10,000. It then records: cash sales Rs 20,000 and cash deposited into bank Rs 12,000 (contra). Cash paid to a supplier Rs 6,000 and discount allowed to a customer Rs 500 on receipt of Rs 9,500 in cash. What is the closing cash balance?

The closing cash balance is Rs 21,500. Cash receipts are 10,000 opening, 20,000 sales and 9,500 actually received, totalling 39,500. Payments are 12,000 deposited in bank and 6,000 to the supplier, totalling 18,000. The discount allowed is not cash, so it is excluded.

  1. ARs 21,500Correct
  2. BRs 22,000
  3. CRs 21,000
  4. DRs 33,500

Explanation

Cash receipts: 10,000 opening + 20,000 sales + 9,500 received from the customer = 39,500. Cash payments: 12,000 deposited into bank + 6,000 paid to the supplier = 18,000. Closing cash = 39,500 - 18,000 = 21,500. Rs 22,000 wrongly counts the discount allowed as a cash receipt only partly (10,000+20,000+10,000-18,000), and the discount is not cash.

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