Rectification of error

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/-

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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https://www.youtube.com/user/jbsclasses