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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cash Book, Bank Book, Petty Cash Book, Bank Reconciliation Statement

Mehta Ltd's cash book showed a debit bank balance of ₹70,000 before adjustments. Comparison with the pass book revealed: (i) a cheque of ₹6,000 received from a customer was dishonoured, not yet entered in the cash book; (ii) interest of ₹1,800 credited by the bank was not entered in the cash book; (iii) a cheque of ₹4,500 issued was entered in the cash book as ₹5,400. The adjusted cash book balance is:

The adjusted cash book balance is ₹66,700. Deduct the dishonoured cheque of ₹6,000, add interest of ₹1,800, and add back ₹900 because the issued cheque was overstated in the cash book by that amount: 70,000 minus 6,000 plus 1,800 plus 900.

  1. A₹66,700Correct
  2. B₹65,100
  3. C₹64,900
  4. D₹66,600

Explanation

Adjust the cash book: 70,000 - 6,000 (dishonour) = 64,000; + 1,800 (interest) = 65,800; the cheque was recorded at 5,400 instead of 4,500, so too much was deducted; add back 900 = 66,700. Working backwards: 66,700 - 900 - 1,800 + 6,000 = 70,000. Ignoring the error gives 65,800, and treating the error as a further deduction gives 64,900.

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