PRC-1 · Chapter 9 · Question 67 of 100
A cheque of Rs. 450,000 issued by a customer as an advance was deposited but later returned by the bank as dishonoured. What is the correcting journal entry?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Advance from Customer Rs. 450,000, Credit Bank Rs. 450,000
Explanation
Since the advance cheque bounced, the cash book must be credited to reverse the receipt, and the liability (Advance from Customer) must be removed by debiting it.
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