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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cash Book, Bank Book, Petty Cash Book, Bank Reconciliation Statement

Gupta & Co. finds its cash book bank balance is ₹62,500 (debit). Bank charges of ₹400 and an insurance premium of ₹2,100 paid directly by the bank under a standing instruction are not yet recorded in the cash book. What is the correct adjusted cash book balance?

The adjusted cash book balance is ₹60,000. Bank charges and the insurance premium paid by the bank are payments not yet recorded in the cash book, so both are deducted from ₹62,500: 62,500 minus 400 minus 2,100 equals 60,000.

  1. A₹60,000Correct
  2. B₹65,000
  3. C₹62,100
  4. D₹59,600

Explanation

Both items are bank debits not yet entered in the cash book, so the cash book balance must be reduced. 62,500 - 400 - 2,100 = 60,000. Adding them (65,000) is the wrong sign. Deducting only the premium gives 60,400, and only the charges gives 62,100, each missing one adjustment.

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