Concept:A dishonored cheque is a cheque that the bank refuses to pay, usually due to insufficient funds.
When this happens, the earlier bank receipt entry must be reversed in the books.
Explanation:In a three-column cash book, the bank column records all money movements through the business bank account.
When a cheque is first received from a debtor, it is entered on the debit side of the bank column because the bank balance increases.
If the bank later dishonors that cheque, the money is taken back from the business account.
The earlier debit entry, therefore, no longer stands and must be cancelled.
To cancel it, the bookkeeper writes the same amount on the credit side of the bank column.
The ledger narration used for this entry is "By Debtor A/C".
This shows that the debtor still owes the business the amount of the dishonored cheque.
The credit entry also reduces the bank balance to its correct value.
Answer:Dishonored cheques will be shown on the bank column (credit side).