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CA Foundation · Accounting · Bank Reconciliation Statement

While preparing an adjusted cash book, Kapoor Traders finds that a cheque of ₹3,500 paid to a supplier was entered in the bank column of the cash book as ₹5,300, although the bank paid ₹3,500. What adjustment is needed in the cash book?

Add ₹1,800 to the cash book balance. The payment was recorded as ₹5,300 instead of ₹3,500, so the bank column credit was overstated by ₹1,800, which understated the cash book balance. Correcting the error therefore requires increasing the balance by ₹1,800.

  1. ADeduct ₹1,800 from the cash book balance
  2. BAdd ₹1,800 to the cash book balanceCorrect
  3. CAdd ₹8,800 to the cash book balance
  4. DNo adjustment is needed because the bank paid the correct amount

Explanation

The payment was over-recorded by ₹5,300 - ₹3,500 = ₹1,800. A payment is a credit in the bank column, so the credit was too large and the balance was understated. The cash book balance must be increased by ₹1,800. Deducting would double the error.

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