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

The pass book of Mehta & Co. shows an overdraft of ₹12,000 on 31 March. Cheques issued of ₹7,000 are not yet presented, and cheques deposited of ₹4,000 are not yet collected by the bank. What is the balance as per the cash book?

The cash book shows an overdraft of ₹15,000. Starting from the pass book overdraft of ₹12,000, the unpresented cheques of ₹7,000 increase the overdraft, and the uncollected deposits of ₹4,000 reduce it, giving 12,000 + 7,000 - 4,000 = 15,000.

  1. AOverdraft ₹9,000Correct
  2. BOverdraft ₹15,000
  3. COverdraft ₹23,000
  4. DFavourable balance ₹9,000

Explanation

Start with the pass book overdraft of ₹12,000. Cheques issued but not presented reduce the overdraft shown in the cash book relative to the bank: cash book is already lower by 7,000, so the overdraft in the cash book is 12,000 + 7,000 = 19,000 before considering deposits. Deposits not yet credited by the bank: the cash book has already increased the balance by 4,000, so the overdraft is 19,000 - 4,000 = 15,000. Check the other way: cash book overdraft 15,000 - 7,000 reversed... the cash book is more overdrawn by the issued cheques (7,000) and less overdrawn by the deposits (4,000), giving 12,000 + 7,000 - 4,000 = 15,000.

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