Which one of the following statements is true?i. A debit entry in the cash book will increase an overdraft in the accountsii. A debit entry in the cash book will increase a bank balance in the accountsiii. A credit entry in the cash book will increase a bank balance in the accountsiv. A credit entry in the cash book will not influence a bank balance in the accountsGroup of answer choicesA. ivB. iiiC. iD. ii
Question
Which one of the following statements is true?i. A debit entry in the cash book will increase an overdraft in the accountsii. A debit entry in the cash book will increase a bank balance in the accountsiii. A credit entry in the cash book will increase a bank balance in the accountsiv. A credit entry in the cash book will not influence a bank balance in the accountsGroup of answer choicesA. ivB. iiiC. iD. ii
Solution
The correct answer is B. iii. A credit entry in the cash book will increase a bank balance in the accounts.
Here's why:
i. A debit entry in the cash book will not increase an overdraft in the accounts. Instead, it will decrease it because a debit entry in the cash book means the business has received cash, reducing the amount of overdraft.
ii. A debit entry in the cash book will not increase a bank balance in the accounts. It will decrease it because a debit entry in the cash book means the business has paid out cash.
iii. A credit entry in the cash book will increase a bank balance in the accounts. This is because a credit entry in the cash book means the business has received cash, increasing the bank balance.
iv. A credit entry in the cash book will influence a bank balance in the accounts. It will increase it because a credit entry in the cash book means the business has received cash.
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