Theory question 106
Banking and Bank ReconciliationOn 31st December, 1991 the Cash book of A. Begun, a retailer showed an overdraft of ₦20. The bank balance was ₦193 Credit.
You are given the following additional information: (a) A cheque for ₦28 received by Begun and entered in his Cash Book on 31st December, 1991 was not credited by bank until 2nd January, 1992. (b) A Credit transfer of ₦114 in settlement of a debt by a customer has not been entered in the Cash Book. (c) Cheques drawn by Begun on 26th December, 1991 amounting to ₦268 were not paid by the bank until after 31st December, 1991. (d) In December, 1991 the bank debited Begun's account with ₦14 for bank charges. No entry has been made in Begun's book. (e) A dividend of ₦58 was paid directly to bank. (f) Standing order on insurance for ₦20 was paid by the bank. (g) A cash payment of ₦12 was recorded in the bank column of the Cash Book. (h) A cheque of ₦63 lodged by a Begun was credited to A. Degun's account. (i) A dishonoured cheque of ₦123 was not recorded in the Cash Book. (j) A cheque for rates of ₦67 on 10th December, 1991 had been entered in the Cash Book as ₦76.
You are required to. (i) Prepare an adjusted Cash Book. (ii) Bank reconciliation statement as at 31st December, 1991.
Show the model answer
(i) Adjusted Cash Book (bank column)
Dr: credit transfer 114; dividend 58; cash payment wrongly entered in bank column 12; rates overstated (76 − 67) 9; total 193
Cr: balance b/d (overdraft) 20; bank charges 14; standing order (insurance) 20; dishonoured cheque 123; balance c/d 16; total 193
Adjusted balance ₦16 debit (in favour of Begun)
(ii) Bank Reconciliation Statement as at 31 December 1991: balance per adjusted cash book 16; add unpresented cheques 268 = 284; less uncredited cheque 28 = 256; less cheque credited to A. Degun in error (bank's mistake) 63; balance per bank statement ₦193 credit
The bank's own error (₦63 to the wrong customer) goes only in the reconciliation, not in the cash book.