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CMA Foundation · Fundamentals of Financial and Cost Accounting · Accounting Cycle

Ledger of Iyer Stores shows the Cash Account: opening balance Rs 25,000 (debit); cash sales Rs 60,000; receipts from debtors Rs 40,000; cash purchases Rs 55,000; salaries paid Rs 18,000; deposited into bank Rs 30,000. In balancing, the Rs 30,000 was wrongly posted to the debit of Cash. After correcting the error, what is the right closing cash balance?

The correct closing cash balance is Rs 22,000 debit. Debits are Rs 1,25,000 (opening, sales and debtor receipts) and credits are Rs 1,03,000 (purchases, salaries and the bank deposit). The deposit into bank is a payment out of cash, so it must be credited.

  1. ARs 22,000 debitCorrect
  2. BRs 82,000 debit
  3. CRs 52,000 debit
  4. DRs 12,000 debit

Explanation

Correct debits = 25,000 + 60,000 + 40,000 = 125,000. Correct credits = 55,000 + 18,000 + 30,000 = 103,000. Closing balance = Rs 22,000 debit. Rs 82,000 results from wrongly debiting the deposit (125,000+30,000-73,000).

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