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Gautami had issued a cheque of₹7,500 as her LIC premium. The cheque was dishonoured due to technical reasons. She paid cash to LIC against the dishonoured cheque. No entry was passed in the Cash Book for dishonour of cheque.?
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Gautami had issued a cheque of₹7,500 as her LIC premium. The cheque wa...
Understanding the Dishonour of Cheque
When a cheque is issued and subsequently dishonoured, it creates a need for proper accounting entries. In Gautami's case, her cheque for ₹7,500 issued as an LIC premium was dishonoured due to technical reasons.
Reasons for Dishonour
- The cheque was dishonoured, but no entry was made in the Cash Book.
- This oversight can lead to inaccuracies in financial reporting.
Cash Payment Against Dishonoured Cheque
- Gautami settled her LIC premium by paying cash after the cheque was dishonoured.
- This cash payment should have been recorded to reflect the actual financial activity.
Accounting Treatment
- The dishonoured cheque should have been recorded as a debit to the Bank Account and a credit to the relevant liability (LIC Premium).
- The cash payment should be recorded as a debit to the LIC Premium account and a credit to the Cash Account.
Implications of No Entry
- Not recording the dishonour of the cheque can lead to discrepancies in cash flow statements.
- It can also affect the balance sheet, as the liability may appear settled when it has not been.
Conclusion
- Proper accounting practices require all transactions, including dishonoured cheques and subsequent cash payments, to be recorded.
- To maintain accurate financial records, it is crucial for Gautami to ensure that all entries are appropriately noted in the Cash Book.
By following these guidelines, Gautami can avoid confusion and ensure her financial records are accurate and reliable.
When a cheque is issued and subsequently dishonoured, it creates a need for proper accounting entries. In Gautami's case, her cheque for ₹7,500 issued as an LIC premium was dishonoured due to technical reasons.
Reasons for Dishonour
- The cheque was dishonoured, but no entry was made in the Cash Book.
- This oversight can lead to inaccuracies in financial reporting.
Cash Payment Against Dishonoured Cheque
- Gautami settled her LIC premium by paying cash after the cheque was dishonoured.
- This cash payment should have been recorded to reflect the actual financial activity.
Accounting Treatment
- The dishonoured cheque should have been recorded as a debit to the Bank Account and a credit to the relevant liability (LIC Premium).
- The cash payment should be recorded as a debit to the LIC Premium account and a credit to the Cash Account.
Implications of No Entry
- Not recording the dishonour of the cheque can lead to discrepancies in cash flow statements.
- It can also affect the balance sheet, as the liability may appear settled when it has not been.
Conclusion
- Proper accounting practices require all transactions, including dishonoured cheques and subsequent cash payments, to be recorded.
- To maintain accurate financial records, it is crucial for Gautami to ensure that all entries are appropriately noted in the Cash Book.
By following these guidelines, Gautami can avoid confusion and ensure her financial records are accurate and reliable.
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Gautami had issued a cheque of₹7,500 as her LIC premium. The cheque was dishonoured due to technical reasons. She paid cash to LIC against the dishonoured cheque. No entry was passed in the Cash Book for dishonour of cheque.?
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Gautami had issued a cheque of₹7,500 as her LIC premium. The cheque was dishonoured due to technical reasons. She paid cash to LIC against the dishonoured cheque. No entry was passed in the Cash Book for dishonour of cheque.? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Gautami had issued a cheque of₹7,500 as her LIC premium. The cheque was dishonoured due to technical reasons. She paid cash to LIC against the dishonoured cheque. No entry was passed in the Cash Book for dishonour of cheque.? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Gautami had issued a cheque of₹7,500 as her LIC premium. The cheque was dishonoured due to technical reasons. She paid cash to LIC against the dishonoured cheque. No entry was passed in the Cash Book for dishonour of cheque.?.
Gautami had issued a cheque of₹7,500 as her LIC premium. The cheque was dishonoured due to technical reasons. She paid cash to LIC against the dishonoured cheque. No entry was passed in the Cash Book for dishonour of cheque.? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Gautami had issued a cheque of₹7,500 as her LIC premium. The cheque was dishonoured due to technical reasons. She paid cash to LIC against the dishonoured cheque. No entry was passed in the Cash Book for dishonour of cheque.? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Gautami had issued a cheque of₹7,500 as her LIC premium. The cheque was dishonoured due to technical reasons. She paid cash to LIC against the dishonoured cheque. No entry was passed in the Cash Book for dishonour of cheque.?.
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