Adjusting cash book for unrecorded bank charges

Steps:

• Identify balance per cash book: $2,075 debit.
• Subtract bank charges from bank statement not yet recorded in cash book: $150.
• Outstanding cheques of $350 are a reconciling item between adjusted cash book and bank statement; they do not affect the adjusted cash book balance for financial statements.
• Calculate adjusted balance: $2,075 -$150 = $1,925.

Why B is correct:

• The bank balance in financial statements is the cash book balance adjusted for items like unrecorded bank charges, per standard accounting practice for accurate reporting.

Why the others are wrong:

• A: $1,000 ignores the cash book balance and adjustments entirely.
• C: $2,075 uses unadjusted cash book balance, omitting bank charges.
• D: $2,225 adds an unexplained amount, overstating the balance.

Final answer: B