PRC-1 · Chapter 8 · Question 85 of 100
A cheque of Rs. 450,000, issued by a customer as an advance, was dishonoured and returned by the bank on 30 June 2021. What journal entry must be recorded to correct this error?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) DEBIT: Advance from customer Rs. 450,000 and CREDIT: Bank Rs. 450,000
Explanation
When an advance cheque bounces, the bank balance must be reduced (Credit Bank), and the liability for the advance must be removed (Debit Advance from customer).
More Correction of Errors MCQs
- Q87A draft income statement shows a gross profit of Rs. 850,000 and a net profit of Rs. 460,000. It is discovered that closing inventory is…
- Q88An error where a transaction is entered in the wrong class of account (e.g., an asset account instead of an expense account) is called an:
- Q89An error where a transaction is entered in the correct class of account but the wrong specific personal account is known as an:
- Q90The total of the purchases day book was overcast by Rs. 2,500. How is this error corrected?
- Q91A credit sale of Rs. 4,800 to Zaid was recorded in the sales day book as Rs. 8,400. What is the correcting journal entry?