Cash balance reconciliation for sales

Steps:

• Subtract opening cash balance from closing cash balance to get net cash change.
• Add back cash expenses, as they reduce cash without relating to sales.
• Add back cash drawings, as they reduce cash unrelated to business operations.
• Add back cash banked, as it transfers cash out of the cash account.
• The adjusted figure equals cash sales, assuming no other inflows.

Why B is correct:

• Cash discount reduces the cash received from sales but is embedded in the sales inflow, not a separate adjustment in the cash balance formula.

Why the others are wrong:

• A: Cash banked reduces the cash balance and must be added back to isolate sales.
• C: Cash drawings reduce the cash balance and must be added back as non-operating outflows.
• D: Cash expenses reduce the cash balance and must be added back as non-sales outflows.

Final answer: B