Skip to content

ACCA Applied Knowledge · Financial Accounting · Bank reconciliations

Dunmore Co's cash book shows a debit balance of $5,000. The bank statement reveals a dishonoured cheque from a customer of $640 and bank interest received of $90, neither recorded in the cash book. What is the correct entry for the dishonoured cheque in the cash book and ledgers?

Debit receivables and credit bank with $640. The original receipt is reversed because the cheque was dishonoured, so the cash book balance falls and the customer owes the amount again. Sales are not affected because the original sale remains valid.

  1. ADebit receivables $640, credit bank $640Correct
  2. BDebit bank $640, credit receivables $640
  3. CDebit sales $640, credit bank $640
  4. DDebit bank $640, credit sales $640

Explanation

When the cheque was received, bank was debited and receivables credited. On dishonour, the bank balance falls and the customer owes the money again, so debit receivables and credit bank. Debiting sales is wrong because the sale itself still stands.

Did you get it right without looking?

One question tells you little. A timed set on Bank reconciliations shows your real accuracy, how long you take and where you lose marks.

Practise Bank reconciliationsFree diagnostic mock

More Bank reconciliations questions