CA Foundation · Accounting · Bank Reconciliation Statement
Rao & Co. has a credit balance of ₹15,000 in the cash book (overdraft) before adjustment. The pass book shows a customer's cheque of ₹4,000 sent for collection was dishonoured, and not yet entered in the cash book. A standing instruction payment of insurance premium ₹2,500 was made by the bank but not recorded. What is the adjusted cash book balance?
The adjusted cash book shows an overdraft of ₹21,500. The dishonoured cheque of ₹4,000 and the insurance premium of ₹2,500 both reduce the bank balance, so the existing overdraft of ₹15,000 increases by ₹6,500.
- A₹21,500 overdraftCorrect
- B₹8,500 overdraft
- C₹21,500 favourable
- D₹15,000 overdraft
Explanation
Dishonour of a customer's cheque reduces the bank balance, as does the insurance premium paid by the bank. The overdraft grows by ₹4,000 + ₹2,500 = ₹6,500, from ₹15,000 to ₹21,500. The ₹8,500 option wrongly treats the items as reducing the overdraft.
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