Theory question 107
Banking and Bank ReconciliationOn 30th September, 2017, Adedeji's cash book showed a debit balance of GH¢7,600. However, his bank statement showed an overdraft balance of GH¢1,880. On investigation, the following details were discovered:
(i) A standing order of GH¢160 had not been entered in the cash-book; (ii) Bank charges of GH¢40 did not appear in the cash book; (iii) Cash paid into the bank for GH¢400 had been entered in the cash book as GH¢360; (iv) A cheque of GH¢200 received from a customer was dishonoured; (v) The bank received a credit transfer of GH¢400 from a customer; (vi) A cheque of GH¢1,360 paid to Dexteri Ltd had been entered in the cash book as GH¢1,720; (vii) A receipt of GH¢40 shown on the bank statement had not been entered in the cash book; (viii) A cheque drawn amounting to GH¢160 paid is still with the supplier; (ix) Receipts of GH¢3,600 paid into the bank on 30th September 2017 did not appear on the bank statement until October 2017; (x) A cheque of GH¢1,080 paid into the bank had been wrongly credited by bank as GH¢600; (xi) A transfer of GH¢6,000 to bank had not been recorded in the cash book.
You are required to prepare: (a) Adjusted Cash Book; (b) Bank Reconciliation Statement as at 30th September, 2017.
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(a) Adjusted Cash Book (GH¢): Dr balance b/d 7,600; understated receipt (400 − 360) 40; credit transfer 400; payment overstated (1,720 − 1,360) 360; receipt omitted 40 = 8,440 | Cr standing order 160; bank charges 40; dishonoured cheque 200; amount transferred 6,000; balance c/d 2,040 = 8,440.
(b) Bank Reconciliation Statement at 30 September 2017: balance per adjusted cash book 2,040 Dr; add unpresented cheque 160 = 2,200; less uncredited receipts 3,600 and bank error (1,080 − 600) 480 = 4,080; balance per bank statement (1,880) overdrawn.
Cash-book items first; then unpresented, uncredited and the bank's own error in the reconciliation.