Question 21 of 50intermediate💡 UnderstandTrue / False1 mark

Cheques deposited but not collected will result in increasing the balance of the cash book when compared to passbook.

Correct Answer

True

Exercise: Test Your Understanding - III | Q: 4 | (Page 14)
For More Understanding

Explanation

This statement is True. According to the textbook context, when a firm receives cheques from customers, they are immediately recorded on the debit side of the cash book, which increases the bank balance as per the cash book. However, the bank credits the customer's account only when the cheque amount is actually realized (collected). Since the clearing process takes time, the cash book shows a higher balance compared to the passbook during this interim period. This timing difference is explicitly mentioned in point 4 of the context and explained in section 5.1.1(b).

Solution Steps

  1. Step 1: Identify the scenario - cheques deposited but not yet collected by the bank.

  2. Step 2: Understand that the firm records the cheque immediately in the cash book (debit side), increasing the balance.

  3. Step 3: Recognize that the bank only credits the account when the cheque is actually cleared.

  4. Step 4: Conclude that during this gap, the cash book balance exceeds the passbook balance, making the statement True.

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