CMA Foundation · Fundamentals of Financial and Cost Accounting · Accounting Cycle
On 31 March, the cash book of Sharma Traders shows a bank overdraft of Rs 12,000. A cheque of Rs 5,000 issued to a supplier has not yet been presented to the bank. No other differences exist. What balance will the bank pass book show on that date?
The pass book shows an overdraft of Rs 7,000. The unpresented cheque of Rs 5,000 has already been entered in the cash book but not yet deducted by the bank, so the bank's overdraft is Rs 5,000 lower than the cash book overdraft of Rs 12,000.
- AOverdraft of Rs 7,000Correct
- BOverdraft of Rs 17,000
- CCredit balance of Rs 7,000
- DOverdraft of Rs 12,000
Explanation
Cash book overdraft Rs 12,000. The unpresented cheque has reduced the cash book balance but not yet the bank's. So the bank's overdraft is smaller by Rs 5,000: 12,000 - 5,000 = Rs 7,000 overdraft. Rs 17,000 wrongly adds the cheque instead of removing it.
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