Recording of Transactions-II

If a cheque received from a customer is dishonoured, the bank will return the dishonoured cheque and debit the firm’s account. On receipt of such cheque or intimation from the bank, the firm will make an entry on the credit side of the cash book by entering the amount of the dishonoured cheque in the bank column and the name of the customer in the particulars column. This entry will restore the position prevailing before the receipt of the cheque form the customer and its deposit in the bank. Dishonour of a cheque means return of the cheque unpaid, generally due to insufficient funds in the customer’s account with the bank.

If the bank debits the firm on account of interest, commission or other charges for bank services, the entry will be made on the credit side in bank column. If the bank credits the firm’s account, the entry will be made on the debit side of the cash book in the appropriate column. The format of double column cash book is shown in figure . .

Cash Book Dr Cr Receipts Payments Fig. . : Format of a double column cashbook We will now learn how the transactions are recorded in the double column cash book.