Bank charges amounting to $5000 was not entered in the cash book. Identify the correct adjustment in cash book?
Correct answer: C. Bank charges will be credited in cash book
- A. Bank charges will be debited in cash book
- B. Bank charges will be added to cash book balance
- C. Bank charges will be credited in cash book
- D. Bank charges need no adjustment in cash book
Explanation
Bank charges are an expense and reduce the bank balance, so they are entered on the credit side of the cash book. This adjustment reconciles the cash book with the lower bank statement balance.
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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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