A company has $100 in Bank A, overdrafts in a separate account with Bank B by ($50), and has $75 in petty cash. How should cash be reported on the balance sheet?

Rationale

$125

To determine how cash should be reported on the balance sheet, we add the positive cash balances and subtract any overdrafts. The total cash includes $100 in Bank A and $75 in petty cash, while the $50 overdraft in Bank B decreases the overall cash available. Thus, the calculation is $100 (Bank A) + $75 (petty cash) - $50 (overdraft) = $125.

A ($50) YOUR ANSWER

This amount only reflects the overdraft in Bank B, which is not an accurate representation of the company's total cash position. Cash on the balance sheet should include all available funds, not just those that are negative. Therefore, $50 does not account for the positive cash in Bank A or petty cash.

B ($75) YOUR ANSWER

This figure represents only the amount of petty cash available, ignoring the cash in Bank A and the overdraft in Bank B. To accurately report cash on the balance sheet, all cash sources must be included, so this option fails to provide a complete picture of the company's cash assets.

C ($100) YOUR ANSWER

While this option correctly states the amount in Bank A, it disregards the $75 in petty cash and the effect of the $50 overdraft. Cash reporting should include all cash assets minus any liabilities related to cash, making this answer insufficient and misleading.

D ($125) CORRECT

Correctly accounts for the total cash available: $100 in Bank A plus $75 in petty cash, while appropriately reflecting the impact of the $50 overdraft by subtracting it. This comprehensive view provides an accurate cash position for the company.

Conclusion

In summary, when calculating cash for balance sheet reporting, all cash assets must be included while acknowledging any overdrafts as liabilities. The total cash available for the company is $125, which combines the funds from Bank A and petty cash, minus the overdraft. Accurate cash reporting is essential for a clear financial picture, enabling informed decision-making.

A company has $100 in Bank A, overdrafts in a separate account with Bank B by ($50), and has $75 in petty cash. How should cash be reported on the balance sheet?

$125

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