ICAEW AF · Chapter 5 · Question 9 of 9
A business's bank statement at the year end shows an overdraft of £2,600. Unpresented cheques total £1,450 and outstanding lodgements total £3,900. Bank charges of £75 on the statement have not yet been recorded in the cash book. There are no other differences. What was the balance in the cash book BEFORE it was updated for the bank charges?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) £75 overdrawn
Explanation
Correct cash book balance = bank statement (-£2,600) - unpresented cheques £1,450 + outstanding lodgements £3,900 = -£150, an overdraft of £150. That is the balance after bank charges of £75 have been deducted. Before recording them, the cash book showed -£150 + £75 = -£75, an overdraft of £75.
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