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Question:
Sarah,s records show that her business bank account is overdrawn by $1000.The balance on the bank statement is only $500 overdrawn .
Assuming there are no errors in the bank statement ,what could account for the difference?
A)Bank charges of $500 charged by the bank
B)A decrease in bank overdraft of $500
C)Unrepresented cheques posted to suppliers totalling $500
D)$500 paid into the bank has yet to be added to the balance
Confused here please tell me the right answer and explain the reason for it
Thanksunpresented cheques posted to suppliers totalling $500. the cheque has already been written but the supplier hasnt presented the cheque to the bank for cashing
For questions of this nature, just check the effect of each option on the data given in the question.
You’ve: Cash Book Bal = -$1000 and Bank Statement Bal = -$500
a) Bank charges adjusted in Cash Book. So new CB Bal = -1000 – (500) = -1500
b) Reducing Bank O/D. This means that the magnitude of the O/D is REDUCED.
Since O/D is negative, for its magnitude to drop, you’ll have to ADD to it.
Look at it this way: You have to PAY when you have an O/D. Due to a reduction, you have to pay LESSER, essentially reducing the negative amount to be paid.
So: -500 – (-500) = -500 + 500 = 0 is the new bank balance.c) Unpresented Cheques represent a payment made by us, adjusted in Bank Statement.
So new Bank Statement Bal = -500 – (500) = -1000
Which equals the CB bal.d) Adjust the bank statement bal. Since money is paid INTO bank, the bal will increase. New Bank Statement Bal. = -500 + 500 = 0
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