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The cash book shows a bank balance of $5,675 overdrawn at 31 August 20X5. It is subsequently discovered that a standing order for $125 has been entered twice, and that a dishonoured cheque for $450 has been debited in the cash book instead of credited.
Hi sir. I have wacthed your bank recon. video, I have read book. But still don’t know how treat with dishonoured cheque. Please help me.
A dishonoured cheque is a cheque that we have received (and entered in the cash account as a receipt) but later we find out that we had not in fact received the money.
So when we find out that it has been dishonoured, we need to cancel it by crediting cash.
In your question, they have debited cash instead of credited, and so to correct it we need to credit cash twice.
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