PRC-1 · Chapter 9 · Question 39 of 100
A cheque for Rs. 4,000 was issued to a supplier and recorded in the cash book, but it was not signed by the authorized signatory and was returned by the bank. What should the accountant do?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit the cash book by Rs. 4,000 to reverse the payment.
Explanation
Since the cheque is invalid, the payment was not processed. The original credit in the cash book must be reversed by debiting the cash book to restore the funds.
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