A company was entered in hire purchase agreement and had to pay $1000 per month. Three payments were made via bank account but no entry was found in cash book. Identify the correct adjustment in cash book
Correct answer: D. $3000 will be subtracted from cash book balance
- A. $1000 will be added to cash book balance
- B. $2000 will be deducted from cash book balance
- C. $3000 will be added to cash book balance
- D. $3000 will be subtracted from cash book balance
Explanation
Three bank payments of $1,000 each were omitted, so the cash book balance is overstated by $3,000 and must be reduced by crediting that amount.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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