ACCA Applied Knowledge · Financial Accounting · Cash
Kestrel Ltd's cash book shows an overdrawn balance of $1,800 before adjustment. The bank statement shows a dishonoured customer cheque for $450 that has not been recorded in the cash book. What is the adjusted cash book balance, and what is the double entry for the dishonoured cheque?
The adjusted balance is an overdraft of $2,250. A dishonoured customer cheque reverses the earlier receipt, so debit Receivables and credit Bank for $450, making the overdrawn balance of $1,800 worse by that amount.
- AOverdrawn $2,250; Dr Receivables, Cr BankCorrect
- BOverdrawn $1,350; Dr Receivables, Cr Bank
- COverdrawn $2,250; Dr Bank, Cr Receivables
- DOverdrawn $1,350; Dr Bank, Cr Receivables
Explanation
A dishonoured cheque reverses the earlier receipt: Dr Receivables $450, Cr Bank $450. The bank position worsens, so the overdraft rises from $1,800 to $2,250. Option B adds the cheque to the balance instead of deducting it.
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