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

On 31 March, the bank column of Mehta Stores' cash book showed Rs 25,000 debit. A cheque of Rs 2,500 received from a customer was dishonoured and debited by the bank, but not entered in the cash book. In which way should it be treated when preparing the reconciliation from the cash book balance?

Deduct Rs 2,500 from the cash book balance. The bank has already debited the dishonoured cheque, so the cash book must record it as a reduction in bank balance, giving a corrected balance of Rs 22,500.

  1. AAdd Rs 2,500 to the cash book balance
  2. BDeduct Rs 2,500 from the cash book balanceCorrect
  3. CIgnore it as it is a timing difference
  4. DAdd it to the bank statement balance

Explanation

A dishonoured cheque is a debit to the customer and a credit to bank in the cash book. The bank has already reduced its balance, so the cash book balance must be reduced: 25,000 - 2,500 = Rs 22,500. Adding it would overstate the bank balance.

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