A company's bank reconciliation shows:Cash book balance (31 Dec)2,075 debitBank statement balance (31 Dec)2,250 creditBank charges not in cash book150Outstanding cheques325What bank balance should be reported in the financial statements?

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SSC Financial and Cost Accounting P-1 QUESTION #6078

Question 1

A company's bank reconciliation shows:

Cash book balance (31 Dec)	$2,075 debit
Bank statement balance (31 Dec)	$2,250 credit
Bank charges not in cash book	$150
Outstanding cheques	$325

What bank balance should be reported in the financial statements?

$1,600
$1,925✔️
$2,075
$2,225

Correct Answer Explanation

The financial statements show the updated cash book balance. Updated Cash Book = Draft Cash Book ($2,075) - Bank Charges ($150) = $1,925. Note that outstanding cheques are used to reconcile the bank statement to the cash book, not the other way around.

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