ICAEW AF · Chapter 5 · Question 3 of 9
The cash book of a business shows a debit balance of £5,180. On comparing it with the bank statement, the following are found: 1. Bank charges of £65 have not been entered in the cash book. 2. A direct debit of £240 has not been entered in the cash book. 3. A cheque from a customer for £330 has been dishonoured. 4. A credit transfer of £1,150 received from a customer has not been entered in the cash book. What is the corrected cash book balance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) £5,695 debit
Explanation
Corrected balance = £5,180 - bank charges £65 - direct debit £240 - dishonoured cheque £330 + credit transfer £1,150 = £5,695. The dishonoured cheque was originally recorded as a receipt, so it must be reversed by a credit (reduction) in the cash book. The credit transfer is money received that has not yet been recorded, so it increases the balance.
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