Theory question 106
Banking and Bank ReconciliationNgozi Enterprises cash book showed a debit balance of ₦2,860 on 31st December, 2007. On the same day, the bank statement showed a credit balance of ₦442. On investigation, it was discovered that:
(i) The opening balance of the cash book of ₦1,840 had been brought down as ₦1,408
(ii) A dishonoured cheque of ₦300 was not recorded in the cash book
(iii) A cheque for ₦3,240 issued to a creditor had not been presented for payment
(iv) Standing order of ₦320 was paid by the bank
(v) A cheque of ₦1,200 lodged with the bank had not been credited.
(vi) A dividend of ₦640 was paid direct to the bank.
(vii) The bank had debited ₦130 for its charges.
(viii) A cash payment of ₦20 had been credited to the bank column of the cash book.
(ix) The bank had debited a cheque of ₦4,800 to Ngozi Enterprises account in error.
You are required to prepare: (a) an Adjusted Cash book; and (b) a Bank Reconciliation statement as at 31st December, 2007.
Show the model answer
(a) Adjusted cash book: Dr balance b/d 2,860; error in opening balance (1,840 − 1,408) 432; dividend received 640; cash payment wrongly credited to bank 20 = ₦3,952. Cr dishonoured cheque 300; standing order 320; bank charges 130; balance c/d ₦3,202 = ₦3,952
(b) Bank reconciliation statement as at 31 Dec 2007: balance as per bank statement 442; add uncredited cheque 1,200; add cheque wrongly debited by bank 4,800 = 6,442; less unpresented cheque 3,240 = balance as per adjusted cash book ₦3,202
(or start from 3,202, add 3,240, less 1,200 and 4,800 = 442)
Items the business did not know about go into the cash book; unpresented, uncredited and bank errors go into the reconciliation.