ICAEW BIP · Chapter 7 · Question 10 of 10
A company's budgeted bank balance at the start of a month is an overdraft of £12,000. Budgeted cash receipts for the month are £87,000 and budgeted cash payments are £81,500. What is the budgeted closing bank balance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Overdraft of £6,500
Explanation
Closing balance = opening balance + receipts - payments = -£12,000 + £87,000 - £81,500 = -£6,500. The negative balance means an overdraft of £6,500. Treating the opening overdraft as a positive balance gives the wrong answer of £17,500.
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