Explanation of Dishonored Cheque and its Impact on Sales Return Account



A dishonored cheque is a cheque that has been returned unpaid by the bank due to insufficient funds in the account, a mismatch of signature or date, or any other reason. In this case, a cheque of Rs. 10000 received from Mr. Man Mohan was dishonored, meaning the amount was not paid by the bank.



When a cheque is dishonored, the amount is debited from the account to which the cheque was credited. In this case, the amount of Rs. 10000 was credited to the sales return account. Therefore, the sales return account will be debited with Rs. 10000, which means that the company will incur a loss of Rs. 10000.



The reason for crediting the sales return account is not clear from the given information. However, it can be assumed that the company had received the payment from Mr. Man Mohan for some sales return. Therefore, the amount was credited to the sales return account.



The dishonoring of the cheque will impact the financial statements of the company. The following are the impacts on the financial statements:

• Income Statement: The loss of Rs. 10000 will be recorded as an expense in the income statement, which will reduce the net income of the company.


• Balance Sheet: The sales return account will be reduced by Rs. 10000, which will reduce the total assets of the company. Also, the bank account will be reduced by the same amount, which will reduce the total liabilities of the company.

In conclusion, a dishonored cheque of Rs. 10000 received from Mr. Man Mohan had been posted to the debit of sales return account. This means that the company will incur a loss of Rs. 10000, which will impact its financial statements. The reason for crediting the sales return account is not clear from the given information.