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Difficulty: MediumSingle-Column and Two-Column Cash Books

Kofo, a trader, paid a creditor ₦19,000 by cheque in full settlement of a debt of ₦20,000. How should this transaction be recorded in Kofo's two-column cash book (Cash and Bank)?

  1. Credit Bank column with ₦19,000Answer
  2. B
    Debit Cash column with ₦19,000
  3. C
    Credit Bank column with ₦19,000 and credit Discount Allowed column with ₦1,000
  4. D
    Debit Bank column with ₦20,000

Answer

Credit Bank column with ₦19,000
When a payment is made by cheque, the transaction represents an outflow of funds from the bank account. Therefore, it is entered on the credit side of the two-column cash book in the Bank column with the actual amount paid (₦19,000).

Step-by-Step Solution

1
Identify the mode of payment and the actual cash/bank outflow
The payment was made by cheque, which means money leaves the bank account, requiring an entry of ₦19,000 in the Bank column.
Payments reduce the bank balance and must be recorded on the credit side of the Cash Book.
2
Determine the correct side of the two-column cash book
Credit side (payments side) under the Bank column for ₦19,000.
In a two-column cash book (Cash and Bank), all cheque payments are credited to the Bank column.

Key Concept

Recording payments by cheque in a two-column cash book
Estimated Time:1m 0s
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Topics

Single-Column and Two-Column Cash Books

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