Credit balance bank in balance sheet?

[Acid]

Hi

I would just like to ask you something . Perhaps its my very misunderstanding or an error.

GTG ST page A3.7 , Example ( Yashweta Inc) : Purchase a machine by paying a cheque of $25,000

So the entry should be
Machine Dr $25,000

Bank Cr $25000

in bracket it says (REFLECTED IN THE TOTAL OF THE NON CURRENT ASSETS IN THE BALANCE SHEET)

How would the Cr Bank balance she reflected in the balance sheet?

Isnt Bank a/c an asset and hence shown on the debit side?

Thanks

Acid

[Geetanjali]

Hi Acid,

Firstly I would like to point out to you that for:
Cr Bank $25,000
The bracket says – REFLECTED IN THE TOTAL OF CURRENT ASSETS IN BALANCE SHEET

Now as to your query:

Assume you have an amount of $100,000 in your bank account. Out of this $100,000 you spend $25,000 on purchasing a new car. Hence your revised balance in the bank will be $75,000 i.e. $100,000 - $25,000.

Now let us see how this is accounted for

1) Bank balance has a debit of $100,000 (initial balance)
2) Bank will be given a credit of $25,000 (pay for the car)
3) Net bank debit balance is $75,000 (revised balance in bank account)

The asset is credited when there is a reduction in the amount of the asset.

Hope this answers your query.

Regards
Geetanjali