Question 23 of 50intermediate💡 UnderstandTrue / False1 mark

The debit balance of the bank account as per the cash book should be equal to the credit balance of the account of the business in the books of the bank.

Correct Answer

True

Exercise: Test Your Understanding - III | Q: 6 | (Page 14)
For More Understanding

Explanation

The statement is correct. According to the context, the debit balance as per the cash book represents the balance of deposits held at the bank by the firm. From the bank's perspective, the same amount appears as a credit balance in the passbook because the bank owes this money to the business (it is a liability for the bank). This is a fundamental principle of bank reconciliation - the business's asset (debit in cash book) equals the bank's liability (credit in bank's books). The context explicitly states: 'The debit balance as per the cash book means the balance of deposits held at the bank. Such a balance will be a credit balance as per the passbook.'

Solution Steps

  1. Step 1: Understand that cash book shows business's perspective - deposits are debits (assets)

  2. Step 2: Understand that passbook shows bank's perspective - business's deposits are credits (liabilities for bank)

  3. Step 3: Conclude that debit balance in cash book should equal credit balance in bank's books, making the statement True

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