Multiple choice

Credit balance in the cash book means

  1. overdraft as per pass book.

  2. favourable balance as per pass book.

  3. both (1) and (2).

  4. none of these.
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A Correct answer
Explanation

When the cash book shows a credit balance, it means the business has spent more than it has deposited - resulting in a bank overdraft. From the customer's perspective, this is a negative bank balance. The pass book (bank statement) would show this as an overdraft. A favourable balance would mean the cash book has a debit balance (money deposited exceeds withdrawals).

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