Question

A company had entered in hire purchase agreement and had to pay Rs 1000 per month. Three payment were accounted for in the pass book but no entry was found in cash book. ldentify the correct adjustment in cash book.

• A. Rs 1000 will be added to cash book balance.
• B. Rs 2000 will be deducted from cash book balance.
• C. Rs 3000 will be added to cash book balance.
• D. Rs 3000 will be subtracted from cash book balance.

Answer 1

Answer: (D)

Rs 3000 will be subtracted from cash book balance.

In the present case the payments made as per hire purchase agreement were accounted for in the pass book but not in the cash book due to which the pass book balance would be lower.

So, the proper adjustment would be to subtract $Rs.3000$ from the cash book balance.