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CSEET · Fundamentals of Accounting · Bank Reconciliation Statement

In a BRS prepared from the cash book balance, a cheque of ₹2,500 received from a customer and deposited was dishonoured, and the bank debited it, but the cash book has not recorded the dishonour. How should the item be treated?

The dishonoured cheque amount is deducted from the cash book balance. The bank has already debited the account, but the cash book still shows the receipt, so the cash book needs a reducing entry to agree with the bank.

  1. AAdded to the cash book balance
  2. BDeducted from the cash book balanceCorrect
  3. CAdded to the pass book balance
  4. DIgnored, as it is a timing difference

Explanation

Dishonour reduces the bank balance and must be recorded in the cash book as a credit, so the cash book balance is deducted by ₹2,500. Adding it overstates the balance. It is not a timing difference, since the cash book must be corrected.

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