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CA Foundation · Accounting · Bank Reconciliation Statement

Nair & Co. found that a cheque of ₹7,200 received from a customer was recorded in the debit side of the bank column of the cash book as ₹2,700. The cheque was correctly credited by the bank. How should this be treated in correcting the cash book?

The cash book bank column should be debited with ₹4,500. The receipt of ₹7,200 was entered as ₹2,700, so the balance is understated by the difference. The pass book is correct and needs no change.

  1. ADebit the bank column by ₹4,500 in the cash bookCorrect
  2. BCredit the bank column by ₹4,500 in the cash book
  3. CDeduct ₹4,500 from the pass book balance
  4. DDebit the bank column by ₹9,900 in the cash book

Explanation

The cash book recorded ₹2,700 instead of ₹7,200, so the receipt is understated by ₹4,500. The bank balance in the cash book must be increased by debiting ₹4,500. Crediting would reduce the balance, which is the opposite effect. The pass book is correct and is not changed.

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