Theory question 105
Banking and Bank ReconciliationThe cash book of Dupe Enterprises showed an overdrawn balance of ₦216,126 and her bank statement also showed ₦905,625 overdrawn. On 31/12/2016, a detailed examination of the records showed the following differences:
(i) A cheque drawn for ₦697,550 had been entered in the cash book as ₦365,050.
(ii) A standing order of ₦420,000 and bank charges of ₦8,750 entered in the bank statement had not been recorded in the cash book.
(iii) Bank lodgement of ₦1,922,375 on 27th December 2016 has not been credited by the bank.
(iv) Dividend received of ₦315,000 had been recorded in the bank but not entered in the cash book.
(v) Cheques paid to suppliers totalling ₦1,165,500 has not been presented for payment.
(vi) A cheque for ₦700,000 received from Tunde was dishonoured by the bank but no entry had been made in the cash book.
(vii) A cheque of ₦256,813 received from a customer was entered as a payment in the cash book.
(viii) A cheque for ₦350,000 recorded in Dupe Enterprises cash book had been credited by the bank to Dudu Enterprises' account.
(ix) An amount of ₦1,050,000 received from a customer was paid directly to Dupe Enterprises account but no entry was made in the cash book.
You are required to prepare:
(a) Dupe Enterprises Adjusted Cash Book;
(b) Bank Reconciliation Statement as at 31st December 2016.
Show the model answer
(a) Adjusted Cash Book (₦): Dr Dividend 315,000; Customer's cheque wrongly entered as payment (2 × 256,813) 513,626; Direct receipt from customer 1,050,000 = 1,878,626 | Cr Balance b/d (overdraft) 216,126; Cheque undercast (697,550 − 365,050) 332,500; Standing order 420,000; Bank charges 8,750; Dishonoured cheque – Tunde 700,000; Balance c/d 201,250 = 1,878,626.
Adjusted balance: ₦201,250 debit (favourable).
(b) Bank Reconciliation Statement as at 31 December 2016 (₦):
Balance as per adjusted cash book 201,250 Dr
Add: unpresented cheques 1,165,500 = 1,366,750
Less: lodgement not yet credited 1,922,375 → (555,625)
Less: cheque wrongly credited by the bank to Dudu Enterprises 350,000 → (905,625)
Balance as per bank statement ₦905,625 overdrawn.
Items only the bank knew about, or cash-book errors, go in the cash book; timing differences and bank errors go in the reconciliation.