A purchase of Rs. 1,870 by cheques has been wrongly posted in the cash...
Effect of wrongly posted purchase on the bank balanceThe effect of wrongly posting a purchase of Rs. 1,870 as Rs. 1,780 in the cashbook will have an impact on the bank balance. Let's analyze the effect of this error on the bank balance in detail.
Explanation:
Mismatch in cashbook and bank statement:When a purchase is made by cheque, the entry is recorded in the cashbook. However, the bank statement will reflect the actual amount debited from the bank account. In this case, the purchase of Rs. 1,870 was entered as Rs. 1,780 in the cashbook. Therefore, there will be a mismatch between the cashbook balance and the bank statement balance.
Effect on the bank balance:To determine the effect on the bank balance, we need to consider whether the error resulted in an overstatement or understatement of the bank balance.
Overstatement of bank balance:If the purchase was erroneously recorded as Rs. 1,780 instead of Rs. 1,870, it means that the cashbook balance is higher than the actual bank balance. This leads to an overstatement of the bank balance.
To correct the error, we need to deduct the difference between the recorded amount and the actual amount from the bank balance.
In this case, the difference is Rs. 1,870 - Rs. 1,780 = Rs. 90.
Therefore, the correct effect on the bank balance would be a
decrease of Rs. 90.
Decrease in bank balance:Hence, the correct answer is option (b)
Decreasing the bank balance by Rs. 90.
Note:It is important to rectify such errors in the cashbook to ensure that the bank balance is accurately reflected. This can be done by making the necessary adjustments in the cashbook to match the bank statement.