PRC-1 · Chapter 9 · Question 31 of 100
If a cheque issued by the business becomes stale and is returned by the supplier, what is the correcting entry in the cash book?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debit Bank, Credit Payables/Supplier
Explanation
The original payment entry (which credited Bank and debited Payables) must be reversed since the payment failed. The bank balance is reinstated (Debit Bank), and the liability is restored (Credit Payables).
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