The bank has correctly recorded a cash receipt of Rs. 8,400, but the business entered only Rs. 4,800 in the cash book. What correction is needed?
Correct answer: A. Add Rs. 3,600 to the cash book
- A. Add Rs. 3,600 to the cash book
- B. Subtract Rs. 3,600 from the cash book
- C. Add Rs. 4,800 to the bank statement
- D. Subtract Rs. 8,400 from the bank statement
Explanation
The receipt is understated in the cash book by Rs. 3,600, calculated as Rs. 8,400 minus Rs. 4,800. The cash book must be increased because the bank statement already contains the correct amount.
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About Bank Reconciliation and Control Accounts
Bank reconciliation explains differences between the cash book and bank statement through unpresented cheques, outstanding deposits, bank charges, direct payments, credited amounts and recording errors. Control accounts summarise receivables and payables ledgers, and their balances are reconciled with individual accounts to locate discrepancies.
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