INTERVIEW QUESTIONS ACCOUNTING PROCESS CASH BOOKS DETAILS

Question: Imprest received of Rs. 100 was recorded as interest paid. What will be the effect on cash balance? a) Cash will reduce by 100. b) Cash will increase by 200. c) Cash will reduce by 200. d) No effect on cash balance.

Answer: (c) Cash will reduce by 200.
Description: Correct Entry:
Cash A/c Dr. 100
To Interest A/c 100
( Being interest received)
Wrong Entry:
Interest A/c Dr. 100
To Cash A/c 100
( Being interest paid)
The effect of the above wrong entry will be that cash balance will be reduced by Rs. 200.

(c) Cash will reduce by 200.
Description: Correct Entry:
Cash A/c Dr. 100
To Interest A/c 100
( Being interest received)
Wrong Entry:
Interest A/c Dr. 100
To Cash A/c 100
( Being interest paid)
The effect of the above wrong entry will be that cash balance will be reduced by Rs. 200. Source: CoolInterview.com

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