ICAEW AF · Chapter 3 · Question 5 of 11
A business's bank account in the general ledger had a debit balance of £2,350 at the start of the month. During the month, receipts of £14,780 and payments of £17,320 were recorded. What is the balance on the account at the end of the month?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) £190 credit (overdrawn)
Explanation
Balance = opening debit £2,350 + receipts £14,780 - payments £17,320 = £17,130 - £17,320 = -£190. Payments exceed the opening balance plus receipts, so the account has a credit balance of £190, meaning the business is overdrawn. A credit balance on a bank account in the business's own ledger is a liability.
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