Question 31 of 50beginner🧠 RememberShort Answer2 marks
Briefly explain the term 'favourable balance as per cash book'.
Correct Answer
A favourable balance as per cash book refers to a debit balance in the cash book. This indicates that the business holds a positive balance of deposits at the bank.
Such a balance arises when the total deposits made by the firm into the bank account exceed the total withdrawals. In the bank's passbook, this specific balance will be reflected as a credit balance.
Exercise: Questions for Practice - Short Answers | Q: 5 | (Page 15)
For More Understanding
Explanation
The answer is derived directly from the section '5.2.1 Preparation of Bank Reconciliation Statement without adjusting Cash Book Balance'. It identifies the favourable balance as a debit balance in the cash book representing deposits, contrasting it with the credit balance in the passbook.