ACCA Applied Knowledge · Financial Accounting · Bank reconciliations
At 31 May, Orwell Co's bank statement shows an overdraft of $3,000. Cheques issued of $4,500 have not been presented and receipts of $2,500 were banked after the statement date. What amount should be reported as a bank overdraft in the statement of financial position?
The overdraft reported is $5,000. Starting with the statement overdraft of $3,000, unpresented cheques of $4,500 increase it and outstanding lodgements of $2,500 reduce it, giving $5,000 as a current liability.
- A$5,000Correct
- B$2,000
- C$7,000
- D$10,000
Explanation
Adjusted balance = -3,000 - 4,500 + 2,500 = -5,000, so an overdraft of $5,000 is reported as a current liability. The $2,000 option adds the cheques rather than deducting them.
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