On 30th September 2017, Adedeji's cash book showed a debit balance of N7,600. However, his bank statement showed an overdraft balance of N1,880. On investigation, the following details were discovered:
i. A standing order of N160 had not been entered in the cash book
ii. Bank charges of N40 did not appear in the cash book
iii. Cash paid into the bank for N400 had been entered in the cash book as N360
iv. A cheque of N200 received from a customer was dishonoured
v. The bank received a credit transfer of N400 from a customer
vi. A cheque of N1,360 paid to Dexter Ltd had been entered in the cash book as N1,720
vii. A receipt of N40 shown on the bank statement had not been entered in the cash book;
viii. A cheque drawn amounting to N160 paid is still with the supplier
ix. Receipts of N3,600 paid into the bank on 30th September 2017 did not appear on the bank statement until October 2017
x. A cheque of N1,080 paid into the bank had been Wrongly credited by the bank as GH¢ 600
xi. A transfer of N6,000 to the bank had not been recorded in the cash book.
You are required to prepare
(a) Adjusted Cash Book;
Treatment. Only items that the trader had not yet recorded, or had recorded wrongly in the cash book, are adjusted here. Items (viii) unpresented cheque, (ix) uncredited lodgement, and (x) the bank's own error are timing/bank errors that belong in the reconciliation statement, NOT the cash book. The N400 credit transfer (v) and the N40 receipt (vii) are both direct credits to be added; item (iii) understated a lodgement by N40 (add back); item (vi) overstated a payment by N360 (add back); item (xi) is a transfer received into the bank not yet recorded (add).
(a) Adjusted (Adjusted) Cash Book as at 30 September 2017
| Dr | N | Cr | N |
|---|
| Balance b/d | 7,600 | Standing order (i) | 160 |
| Lodgement understated (iii): 400 - 360 | 40 | Bank charges (ii) | 40 |
| Credit transfer (v) | 400 | Dishonoured cheque (iv) | 200 |
| Overstated payment corrected (vi): 1,720 - 1,360 | 360 | Balance c/d | 14,040 |
| Receipt on statement (vii) | 40 | | |
| Transfer into bank (xi) | 6,000 | | |
| Total | 14,440 | Total | 14,440 |
Adjusted cash book balance \(= 7{,}600 + 40 + 400 + 360 + 40 + 6{,}000 - (160 + 40 + 200) = N14{,}040\) (debit balance).
Treatment. Only items that the trader had not yet recorded, or had recorded wrongly in the cash book, are adjusted here. Items (viii) unpresented cheque, (ix) uncredited lodgement, and (x) the bank's own error are timing/bank errors that belong in the reconciliation statement, NOT the cash book. The N400 credit transfer (v) and the N40 receipt (vii) are both direct credits to be added; item (iii) understated a lodgement by N40 (add back); item (vi) overstated a payment by N360 (add back); item (xi) is a transfer received into the bank not yet recorded (add).
(a) Adjusted (Adjusted) Cash Book as at 30 September 2017
| Dr | N | Cr | N |
|---|
| Balance b/d | 7,600 | Standing order (i) | 160 |
| Lodgement understated (iii): 400 - 360 | 40 | Bank charges (ii) | 40 |
| Credit transfer (v) | 400 | Dishonoured cheque (iv) | 200 |
| Overstated payment corrected (vi): 1,720 - 1,360 | 360 | Balance c/d | 14,040 |
| Receipt on statement (vii) | 40 | | |
| Transfer into bank (xi) | 6,000 | | |
| Total | 14,440 | Total | 14,440 |
Adjusted cash book balance \(= 7{,}600 + 40 + 400 + 360 + 40 + 6{,}000 - (160 + 40 + 200) = N14{,}040\) (debit balance).
