The cash book shows a credit (overdrawn) balance of KSh 8,000. Bank charges of KSh 500 shown on the statement have not been entered in the cash book. What is the corrected cash book balance?
Answer and explanation
Correct answer: B. KSh 8,500 overdrawn
- Step 1: The bank charges are a payment from the bank account, so they increase the overdrawn balance. Step 2. 8,000 + 500 = 8,500 overdrawn. Answer: KSh 8,500 overdrawn. Why not the others: KSh 7,500 overdrawn: Bank charges increase the overdraft, they do not reduce it. KSh 8,000 overdrawn: That leaves out the bank charges. KSh 500 overdrawn: That is the bank charges only.
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