alleryStart learning →A bank balance shown as Rs 14,000 (Cr.) in the books of a trader appears in the statement of affairs as:
AAn asset, being cash at bank
BA contingent liability note
CA deduction from the capital
DA liability, being an overdraft
Answer & Solution
Correct answer: D. A liability, being an overdraft
1. A bank balance can fall on either side depending on which way it is stated.
2. A debit balance means the trader has money at the bank, so it is an asset.
3. A credit balance means the trader owes the bank, which is a bank overdraft.
4. The format of the statement of affairs lists bank overdraft among the liabilities, so a Rs 14,000 (Cr.) balance is shown on the liabilities side.
5. In the textbook's illustration this is exactly how the opening bank balance of Rs 14,000 (Cr.) is treated.
_Source: TN HSC Class 12 Accountancy (Samacheer Kalvi, Govt of Tamil Nadu), Unit 1 "Accounts from Incomplete Records", §1.7.4 and Illustration 9_
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