A company entered into a hire purchase agreement requiring monthly payments of $1000. Three payments were made through the bank, but these transactions were not recorded in the cash book. What is the correct adjustment to make in the cash book?

Show Answers

Increase the cash book balance by $1000Reduce the cash book balance by $2000Add $3000 to the cash book balanceSubtract $3000 from the cash book balanceNo adjustment needed

Explanation

Since three monthly payments of $1000 each were made via bank but not recorded in the cash book, the total amount of $3000 should be deducted to accurately reflect the cash outflow. Therefore, the cash book balance needs to be reduced by $3000.