Rectification of error

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R.Pavithra

Student CA CPT

48 Points Posted on 07 December 2012

hi friends ,

what will be the entry for this sum

a dishonoured B/R for rs 400 returned to the firm by bank had been credited to bank a/c for collection of bills and debited to B/R a/c .a cheque was later received from the customer for 400 and was duly paid into the firms bank a/c ...pleaase explain me in detail

Replies (2)

CA D R P

Chartered Accountant

313 Points Posted on 07 December 2012

ENTRY ON DISHONOUR:

PARTY A/C ........................DR 400

TO, BANK A/C....... 400

WHY? : BECAUSE WE HAVE TO TAKE AMOUNT FROM THE PARTY AGAIN.., AND BANK A/C THAT WAS DEBITED EARLIER WILL BE REVERSED. BANK WILL PASS ENTRY ONLY ON REALIZATION, SO THINK ONLY FROM OUR POINT OF VIEW...

ENTRY ON GETTING AMOUNT BACK:

NORMAL ENTRY: BANK A/C DR TO PARTY A/C BY AMOUNT 400/-

Jag Bhushan Sharma

Faculty in a B-School

633 Points Posted on 07 December 2012

1. It seems from your question that when the B/R was initially deposited with bank, you passed the entry bank a/c for collection of bills Dr. B/R A/c Cr.

2. When the B/R was dishonoured you should have debited the Debtor (from whom B/R was received) but you debited B/R a/c. (wrongly)

3. Now on receiving the new cheque from the Debtor you debited bank and credited the debtor (though you have not stated this, but i am assuming it).

4. In this case rectifying entry should be Debtor a/c Dr. B/R a/c Cr.

5. By passing this entry, the amount pending in B/R a/c will disappear and also the amount credited to the debtor will also disappear.

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