ACCA Applied Knowledge · Financial Accounting · Bank reconciliations
At 30 June, Harlow Co's bank statement shows an overdrawn balance of $4,200. Unpresented cheques total $1,500 and outstanding lodgements total $2,300. There are no other differences. What is the cash book balance before any adjustments?
The cash book shows an overdraft of $3,400. Starting from the statement overdraft of $4,200, unpresented cheques deepen it by $1,500 and outstanding lodgements reduce it by $2,300, giving $3,400 overdrawn.
- A$3,400 overdrawnCorrect
- B$5,000 overdrawn
- C$3,400 positive
- D$5,000 positive
Explanation
Start with bank statement: -4,200. Unpresented cheques reduce the true balance: -1,500. Outstanding lodgements increase it: +2,300. Cash book = -4,200 -1,500 +2,300 = -3,400, an overdraft of $3,400. The $5,000 overdrawn option reverses the lodgements sign.
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