Imagine a company form of organisation, where the accountant is a jack of all trades.....
He manages the business, takes care of the banking activities .....manages bills receivables /payables....
with this background follow up the case......
- on 30th march the cash balance of the company showed a balance of zero rupees,,,,...
- and the company's bank balance stood at Rs. 19200 on the same day.
- on the same day the accountant goes to the bank to draw some money to make up his cash balance.
- he draws Rs. 5000/-
- as soon as he withdrew the money, he met his company' s trade creditor to whom the company owes Rs. 2000/- for a very long time.
- the creditor did not let the accountant go without paying him the money.
- the brilliant accountant paid him the money and made a notional journal entry in his mind....... so that he could pass the entry as soon as he reached the office.
- The entry he notionally passed was:-
- Cash a/c Dr. 5000 To Bank a/c Cr. 5000
- Sundry trade creditor Dr. 2000 To Cash A/c Rs. 2000
- So his notional balance was Rs. 3000/-
- On the way back to office, unfourtunately the accountant met with an accident and died on the spot. There was no trace of cash when the office people rushed to the spot. All they could find was the bank pass book and the angry creditor.
- all set and done....... the same night, an accounts assistant took up the role of the dead accountant and passed the journal entry..... (he was aware of the payment to creditor)
- the journal entry was Sundry trade Creditor A/c Dr. 2000 To Cash A/c Cr. 2000
- he could not pass the entry for cash receipt becoz he could'nt find any cash.....
- So the real balance according to the cash book was RS(2000)/-
- (a negative cash balance of rs. 2000/-)
- PLEASE DO POST UR COMMENTS ON THIS.........
CAclubindia
