Question

Favourable balance means .

• A. credit balance in the cash book
• B. credit balance in pass book
• C. debit balance in cash book
• D. both (B) and (C)

Answer 1

Answer: (D)

both (B) and (C)

The cash book is a account statement as maintained by the account holder. So if the cash book reflects a debit balance it means that the account is in the nature of a debtor/receivable for the account holder and it would be the opposite for the bank.

The pass book is a copy of the account statement as maintained by the bank. So if the pass book reflects a credit balance it means that the account is in the nature of a creditor/payable for the bank and it would be the opposite for the account holder.

So from the account holder's point of view he would be having a positive/favourable balance in his account in both the above situations whereas for the bank it would be the opposite.