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Plastik had a trade receivable balance owing from Subtrak of $1·2 million as at 30 September 2014. This differed to the equivalent trade payable of Subtrak due to a payment by Subtrak of $400,000 made in September 2014 which did not clear Plastik’s bank account until 4 October 2014. Plastik’s policy for cash timing differences is to adjust the parent’s financial statements.
Could you tell me how to treat this adjustment in the Financial statement?will 400 be added to Bank in Current Assets or Subtracted from bank in Current Liabilities?
If the bank balance figure that is given in the question is an asset ie cash in the bank, the adjustment will be to increase that given figure
If however the bank balance figure given in the question is a liability ie an overdraft, the adjustment will be to decrease that given figure
Does that answer your question?
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