Multiple choice

A cheque of Rs. 35,000 received by M/s Nandini was endorsed to M/s Chandini on account of full settlement of Rs. 35,500 on 1st October 2006. Chandini deposited the same into the bank on 4th October 2006. In the books of M/s Chandini, the amount to be debited on 1st October 2006 will be

  1. cash account Rs. 35,000 and discount account Rs. 500.

  2. bank account Rs. 35,000 and discount account Rs. 500.

  3. cash account Rs. 35,500.

  4. bank account Rs. 35,500.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When Chandini receives an endorsed cheque from Nandini, she debits her Bank Account for the cheque amount (Rs. 35,000) and also debits a Discount/Loss Account for the settlement discount allowed (Rs. 500). The total debit of Rs. 35,500 represents the full settlement amount. Option A incorrectly uses Cash Account instead of Bank Account since the cheque was deposited in bank.

Keep practicing — related questions