A business's bank statement shows a balance of £3,420 in its favour at the month end. Cheques of £1,870 paid to suppliers have not yet been presented, and lodgements of £960 have not yet been credited by the bank. The cash book needs no other adjustment. What is the correct cash book balance?

Correct answer: A) £2,510 debit

Explanation

Start with the bank statement balance of £3,420. Deduct unpresented cheques of £1,870, because the cash book has already recorded those payments, and add outstanding lodgements of £960, because the cash book already shows those receipts. £3,420 - £1,870 + £960 = £2,510, a debit (asset) balance in the cash book.