A cash book shows a debit balance of £2,450 before adjustment. Bank charges of £60 and a direct debit of £340 appear on the bank statement but not in the cash book. Cheques issued of £1,200 are unpresented, and receipts of £900 banked have not yet been credited by the bank. What balance does the bank statement show?
Answer and explanation
Correct answer: A. £2,350 in credit
- Step 1: Adjust the cash book first: £2,450 - £60 - £340 = £2,050.
- Step 2: Unpresented cheques have left the cash book but not the bank, so add them: £2,050 + £1,200 = £3,250.
- Step 3: Receipts not yet credited are in the cash book but not the bank, so deduct: £3,250 - £900 = £2,350.
Answer
£2,350 in credit.
Why not the others: £1,750 reverses both reconciling items, adding the uncredited lodgement and deducting the unpresented cheques. £2,050 is only the corrected cash book balance, with no timing items applied. £2,750 ignores the bank charges and direct debit when correcting the cash book.
Practise more Maintaining financial records.
Free questions with an explanation for every one, and full timed ICAEW ACA Certificate Level mock tests.
More Maintaining financial records questions
- A business buys inventory on credit for £4,000 plus VAT at 20% and is registered for VAT. What is the correct double entry?
- The owner of a sole trader business takes goods costing £500 from inventory for personal use. Which entry is correct?
- A machine cost £48,000 and is depreciated at 25% per annum on the reducing balance method. What is the carrying amount at the end of year 3?
- A vehicle bought for £30,000 is depreciated at 20% a year straight line with no residual value, with a full year's charge in the year of pur…
- At the year end, trade receivables total £80,000 before writing off an irrecoverable debt of £2,000. The allowance for receivables is to be…
- A receivables ledger control account has an opening balance of £45,200. During the month credit sales were £212,000, sales returns £3,600, c…