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why are dishonoured cheques from credit customers placed in the debit side of receivables a/c? is it because we need to add back the money owed by debtors that we removed from receivables because we thought we got paid through cheque?
thank you
Yes, that is the reason.
When we receive the cheque, we think that the customer has paid and so we Dr Cash and Cr Receivables.
When we later find out from the bank that the cheque has been dishonoured and that we have not therefore received payment, we need to reverse the entry and so Dr Receivables and Cr Cash. (The customer is then still owing us the money).
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