The formula for determining the ending cash balance is to subtract the total costs from the total cash available. This concept comes from basic accounting principles where ending cash balance represents the amount of cash that a company or an individual has at the end of a certain period after all the expenses or costs have been paid.
Let's consider each of the provided options:
1. Ending cash balance = Total cash - Total costs
This option represents the correct accounting formula to calculate the ending cash balance. You start with the total cash you have and then subtract all the costs or expenses incurred.
2. Ending cash balance = Total cash + Total costs
This option is incorrect because it suggests you would increase your cash balance by adding your costs, which doesn't make sense since costs are typically expenses that reduce your cash balance.
3. Ending cash balance = Total cash x Total costs
This option is also incorrect and not logical in an accounting sense. Multiplying total cash by total costs would not give you any meaningful measure of your cash position.
4. Ending cash balance = Total cash / Total costs
This option is also incorrect. Dividing total cash by total costs would give you a ratio, not the actual cash balance.
Therefore, the correct formula is:
Ending cash balance = Total cash - Total costs
This formula will give you the actual cash balance remaining at the end of a period after all costs have been accounted for.
