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    Question

    Credit Balance of the Bank in the company’s Cash Book

    is:
    A Asset Correct Answer Incorrect Answer
    B Liability Correct Answer Incorrect Answer
    C Capital Correct Answer Incorrect Answer
    D Revenue Correct Answer Incorrect Answer
    E Expense Correct Answer Incorrect Answer

    Solution

    The transactions in the cash book are recorded as follows: •     All cash receipts are recorded as a debit, •     all cash payments are recorded as a credit As such a credit balance in the cash book indicates the bank account has becomes negative and the company in effect has borrowed from the bank. It is therefore a liability for the company.

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