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The payment side of Cash Book is under cast by Rs. 250. If the starting point of BRS is the Overdraft Balance as per Pass Book, then what would be the treatment to reach to Overdraft Balance of Cash Book ?
- a)Add 250
- b)Less 250
- c)Add 500
- d)Less 500
Correct answer is option 'A'. Can you explain this answer?
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The payment side of Cash Book is under cast by Rs. 250. If the startin...
Overdraft as per passbook is dr. cash book undercast by 250 .i.e. it will be debited by 250 so add 250
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The payment side of Cash Book is under cast by Rs. 250. If the startin...
Explanation:
To understand the treatment to reach the Overdraft Balance of the Cash Book, let's first understand the concept of the Cash Book and the Bank Reconciliation Statement (BRS).
Cash Book:
The Cash Book is a subsidiary book that records all cash transactions of a business. It consists of two sides - the Receipts side and the Payments side. The Receipts side records all cash inflows, such as cash sales, collections from debtors, etc. The Payments side records all cash outflows, such as payments to creditors, expenses, etc.
Bank Reconciliation Statement (BRS):
The Bank Reconciliation Statement is a statement that reconciles the balance of the Cash Book (bank column) with the balance of the Pass Book (bank statement) by accounting for the differences between the two.
Now, let's analyze the given scenario step by step:
Step 1: The payment side of the Cash Book is undercast by Rs. 250.
- This means that the total of the payment side of the Cash Book is Rs. 250 less than the actual amount of payments made.
Step 2: The starting point of the BRS is the Overdraft Balance as per the Pass Book.
- In the Pass Book, if the balance is in the overdraft (negative) and mentioned as an opening balance, it means that the business has taken a loan or overdraft from the bank.
Step 3: Treatment to reach the Overdraft Balance of the Cash Book:
- Since the payment side of the Cash Book is undercast by Rs. 250, it means that the total payments recorded in the Cash Book are less than the actual payments made.
- To reach the Overdraft Balance of the Cash Book, we need to add Rs. 250 to the payment side of the Cash Book.
- Adding Rs. 250 to the payment side will increase the total payments in the Cash Book and bring it in line with the actual payments made.
- By doing so, the Cash Book will show a higher overdraft balance, which will match the overdraft balance as per the Pass Book.
Therefore, the correct treatment to reach the Overdraft Balance of the Cash Book is to add Rs. 250.
To understand the treatment to reach the Overdraft Balance of the Cash Book, let's first understand the concept of the Cash Book and the Bank Reconciliation Statement (BRS).
Cash Book:
The Cash Book is a subsidiary book that records all cash transactions of a business. It consists of two sides - the Receipts side and the Payments side. The Receipts side records all cash inflows, such as cash sales, collections from debtors, etc. The Payments side records all cash outflows, such as payments to creditors, expenses, etc.
Bank Reconciliation Statement (BRS):
The Bank Reconciliation Statement is a statement that reconciles the balance of the Cash Book (bank column) with the balance of the Pass Book (bank statement) by accounting for the differences between the two.
Now, let's analyze the given scenario step by step:
Step 1: The payment side of the Cash Book is undercast by Rs. 250.
- This means that the total of the payment side of the Cash Book is Rs. 250 less than the actual amount of payments made.
Step 2: The starting point of the BRS is the Overdraft Balance as per the Pass Book.
- In the Pass Book, if the balance is in the overdraft (negative) and mentioned as an opening balance, it means that the business has taken a loan or overdraft from the bank.
Step 3: Treatment to reach the Overdraft Balance of the Cash Book:
- Since the payment side of the Cash Book is undercast by Rs. 250, it means that the total payments recorded in the Cash Book are less than the actual payments made.
- To reach the Overdraft Balance of the Cash Book, we need to add Rs. 250 to the payment side of the Cash Book.
- Adding Rs. 250 to the payment side will increase the total payments in the Cash Book and bring it in line with the actual payments made.
- By doing so, the Cash Book will show a higher overdraft balance, which will match the overdraft balance as per the Pass Book.
Therefore, the correct treatment to reach the Overdraft Balance of the Cash Book is to add Rs. 250.
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The payment side of Cash Book is under cast by Rs. 250. If the starting point of BRS is the Overdraft Balance as per Pass Book, then what would be the treatment to reach to Overdraft Balance of Cash Book ?a)Add 250b)Less 250c)Add 500d)Less 500Correct answer is option 'A'. Can you explain this answer?
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