ACCA Applied Knowledge · Financial Accounting · Bank reconciliations
Before updating, Lorne Co's cash book shows a debit balance of $8,400. The bank statement shows a direct debit for insurance of $350 and a customer's direct credit transfer of $1,200, neither yet recorded in the cash book. What is the updated cash book balance?
The updated cash book balance is $9,250 debit. The $8,400 balance is reduced by the $350 insurance direct debit and increased by the $1,200 customer receipt, as both are bank items not yet recorded in the cash book.
- A$9,250Correct
- B$7,550
- C$9,950
- D$8,400
Explanation
Start with 8,400. The direct debit reduces the balance by 350, giving 8,050. The customer's credit transfer adds 1,200, giving 9,250. The $7,550 option reverses the sign of the receipt, and $9,950 adds the direct debit instead of deducting it.
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