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

A firm's bank column of the cash book shows a debit balance. On comparing with the pass book, an amount directly deposited by a customer into the firm's account is found only in the pass book. How should the firm treat it in its books?

The firm should debit the bank column of the cash book and credit the customer's account. The direct deposit raises the firm's bank balance and reduces the amount due from the customer, so the omitted entry must be recorded in the books.

  1. ADebit the bank column and credit the customer's accountCorrect
  2. BCredit the bank column and debit the customer's account
  3. CMake no entry as it will appear in the reconciliation only
  4. DDebit the customer's account and credit the sales account

Explanation

A direct deposit increases the firm's bank balance, so bank is debited. The customer's debt reduces, so the customer's personal account is credited. It is an error of omission in the cash book, needing a cash book entry, not merely a reconciliation note.

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