ACCA Applied Knowledge · Financial Accounting · Cash
Which of the following is the correct double entry when a customer's cheque of $500, previously recorded as received and banked, is returned by the bank as dishonoured?
Debit Receivables $500 and credit Bank $500. The dishonoured cheque reverses the original receipt, reducing the bank balance and reinstating the customer's debt. Sales are not changed because the underlying sale still stands.
- ADebit Receivables $500, Credit Bank $500Correct
- BDebit Bank $500, Credit Receivables $500
- CDebit Sales $500, Credit Bank $500
- DDebit Bank $500, Credit Sales $500
Explanation
The original receipt debited Bank and credited Receivables. A dishonoured cheque reverses this: the money was never received, so credit Bank and reinstate the receivable by debiting Receivables. Sales are not affected because the original sale remains valid.
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