PRC-1 · Chapter 2 · Question 37 of 100
'Galaxy Traders' received a cheque of Rs. 25,000 from a customer and entered it in the cash book. Three days later, the bank returned the cheque as dishonored due to insufficient funds. How is the dishonor recorded in the books of prime entry?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It is entered on the payment side of the cash book to reverse the original receipt.
Explanation
When the cheque was received, it was recorded as a receipt. To cancel that entry when the cheque bounces, an equal amount must be entered on the payment (credit) side of the cash book.
More Books of Prime Entry MCQs
- Q39In a three-column cash book maintained by 'Sapphire Merchants', what does the memorandum column on the payment (credit) side specifically…
- Q40Which of the following documents is most likely to act as the primary source document for an entry on the debit (receipt) side of the cash…
- Q41The petty cashier of 'Silver Line' started the month with an imprest of Rs. 5,000. During the month, Rs. 3,200 was spent on minor…
- Q42'Emerald Traders' determines that a credit customer's outstanding balance of Rs. 15,000 is irrecoverable and must be formally written off…
- Q43Mr. Tariq, the sole owner of a grocery store, takes home trading inventory costing Rs. 8,000 for his family's personal use. How is this…