Question

List the adjustments made to a bank balance to arrive at book income.

Answer 1

To calculate book income, adjustments need to be made to the bank balance. These include adding interest income, subtracting interest expense, adjusting for non-cash items, and accounting for provisions and write-offs.

Step-by-step explanation:

When calculating book income, adjustments need to be made to the bank balance in order to determine the correct amount. These adjustments include:

1. Adding interest income: If the bank has earned interest on loans or investments, this needs to be included as part of the book income.
2. Subtracting interest expense: If the bank has paid interest on deposits or other borrowings, this needs to be deducted from the bank balance.
3. Adjusting for non-cash items: Certain items in the bank balance, such as depreciation or amortization, may not have a direct impact on book income. These items should be adjusted accordingly.
4. Accounting for provisions and write-offs: If the bank has made provisions for potential losses or has written off bad debts, these adjustments need to be considered as well.

By making these adjustments to the bank balance, the book income can be accurately determined.