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CA Foundation · Accounting · Bank Reconciliation Statement

While preparing the adjusted cash book, the accountant of Bose Stores finds that the bank has wrongly debited the firm's account with a cheque of ₹2,000 issued by another customer. How should this error be dealt with?

No cash book entry is needed, because the mistake lies in the bank's records, not the firm's. The wrongly debited ₹2,000 is shown only as a reconciling item in the bank reconciliation statement until the bank corrects it.

  1. AMake a credit entry of ₹2,000 in the adjusted cash book
  2. BMake a debit entry of ₹2,000 in the adjusted cash book
  3. CMake no entry in the cash book, and show it as an adjustment in the reconciliation statementCorrect
  4. DReduce the cash book balance by ₹4,000

Explanation

This is a bank error, not an error in the firm's books. The cash book is already correct, so no entry is passed there. The bank must correct its own records, and the item is shown as a reconciling adjustment to the pass book balance.

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