Reconstructing cash account for theft detection Steps:

• Calculate expected cash in hand: start with opening cash balance.
• Add cash inflows: totals of sales (cash portion) and purchases (to estimate cash outflows).
• Subtract cash outflows: operational payments from purchases.
• Compare to closing cash balance; difference indicates theft—bank items like drawings and cheques are irrelevant.

Why B is correct:

• In incomplete records, cash shortage uses the formula: Closing cash = Opening cash + Cash receipts - Cash payments; bank drawings (item 2) and cheques (item 3) affect bank, not physical cash in hand.

Why the others are wrong:

• A: Items 1 and 4 provide essential opening/closing balances and operational cash flow estimates.
• C: Excludes item 3, but item 2 is also unnecessary for cash-only calculation.
• D: Excludes item 2, but item 3 is also unnecessary for cash-only calculation.

Final answer: B