PRC-1 · Chapter 2 · Question 58 of 100
A cheque received from a credit customer was initially deposited and entered in the cash book. It was subsequently returned by the bank as dishonored. How is this dishonored cheque recorded?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It is entered on the payment side of the cash book to cancel the original receipt.
Explanation
To reverse the original receipt entry of the cheque, an identical amount must be entered on the payment (credit) side of the cash book, reinstating the customer's debt.
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