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When favourable balance as per cash book is the starting point, wrong debit by the bank to the firm will be:
- a)Added
- b)Subtracted
- c)Both
- d)None
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
When favourable balance as per cash book is the starting point, wrong ...
Explanation:
When we talk about bank reconciliation, the starting point is the balance as per cash book. However, sometimes there might be discrepancies between the bank statement and the cash book, which can lead to incorrect entries in the cash book.
One such discrepancy is a wrong debit by the bank to the firm. This means that the bank has debited the firm's account for an amount that was not actually debited. In such a scenario, the correct approach is to subtract the wrong debit from the balance as per cash book.
Why subtract the wrong debit?
The reason for subtracting the wrong debit is that it has already been accounted for in the cash book. Therefore, if we add it again, we will be overstating the balance, which will lead to incorrect financial statements.
For example, let's assume that the balance as per cash book is $10,000. However, the bank has wrongly debited the account for $500. If we add this amount to the balance, we will get $10,500, which is incorrect. The correct balance should be $9,500 ($10,000 - $500).
Conclusion:
In conclusion, when there is a wrong debit by the bank to the firm, we should subtract it from the balance as per cash book. This will give us the correct balance, which can be used to prepare accurate financial statements.
When we talk about bank reconciliation, the starting point is the balance as per cash book. However, sometimes there might be discrepancies between the bank statement and the cash book, which can lead to incorrect entries in the cash book.
One such discrepancy is a wrong debit by the bank to the firm. This means that the bank has debited the firm's account for an amount that was not actually debited. In such a scenario, the correct approach is to subtract the wrong debit from the balance as per cash book.
Why subtract the wrong debit?
The reason for subtracting the wrong debit is that it has already been accounted for in the cash book. Therefore, if we add it again, we will be overstating the balance, which will lead to incorrect financial statements.
For example, let's assume that the balance as per cash book is $10,000. However, the bank has wrongly debited the account for $500. If we add this amount to the balance, we will get $10,500, which is incorrect. The correct balance should be $9,500 ($10,000 - $500).
Conclusion:
In conclusion, when there is a wrong debit by the bank to the firm, we should subtract it from the balance as per cash book. This will give us the correct balance, which can be used to prepare accurate financial statements.
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Community Answer
When favourable balance as per cash book is the starting point, wrong ...
Wrong debit by bank means pass book is understated and cash book is correct.So pass book is less than cashbook and as starting balance is cash book so inorder to make cash book equal to pass book we will substract cashbook with the required amount.
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When favourable balance as per cash book is the starting point, wrong debit by the bank to the firm will be:a)Addedb)Subtractedc)Bothd)NoneCorrect answer is option 'B'. Can you explain this answer?
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