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CA Foundation · Accounting · Bank Reconciliation Statement

A trader's cash book (bank column) shows a debit balance. In the bank's books, the same account would appear as:

A debit balance in the trader's cash book appears as a credit balance in the bank's records. The trader has deposited money, which is an asset for the trader but a liability for the bank, so the sides are reversed.

  1. AA debit balance, because the balance is an asset for both parties
  2. BA credit balance, because the bank owes the money to the traderCorrect
  3. CA debit balance, because the bank has lent money to the trader
  4. DNo balance, because the bank does not keep the trader's account

Explanation

A debit balance in the cash book means the trader has money with the bank. For the bank this is a liability, as it owes the amount to the customer, so the pass book shows a credit balance. The two books therefore record the same transaction from opposite sides.

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