Momoh enterprise cashbook showed a debit balance of Le4,500 on December 31, 2014. Further examination revealed the following:
- A direct debit of Le350 for subscription had been paid by the bank
- Bank charges of Le500 had not been reflected in the cash book
- Payment settled by standing orders were omitted from the cash book; electricity bill Le70, insurance Le100 and medical bill Le120.
- A dividend of Le320 paid directly into the bank had not been entered in the cash book
- It was discovered that the cash book balance brought down was undercast by Le180.
- Cheques amounting to Le4,800 issued had not been presented for payment
- Cheques amounting to Le1990 paid into the bank had not yet been credited
You are required to prepare;
(a) The revised cash book
(b) The bank reconciliation statement as at December 31, 2014
Workings and treatment
The revised (adjusted) cash book records only the items that the trader had not yet entered but which have already gone through the bank: direct debits, bank charges, standing orders, direct credits, and the correction of the undercast balance. Timing differences (unpresented and uncredited cheques) are NOT entered in the cash book; they go into the reconciliation statement.
(a) Revised (Adjusted) Cash Book as at 31 December 2014
| Dr | Le | Cr | Le |
|---|
| Balance b/d | 4,500 | Subscription (direct debit) | 350 |
| Undercast correction | 180 | Bank charges | 500 |
| Dividend received | 320 | Electricity (standing order) | 70 |
| | Insurance (standing order) | 100 |
| | Medical bill (standing order) | 120 |
| | Balance c/d | 3,860 |
| Total | 5,000 | Total | 5,000 |
Revised cash book balance = \(4{,}500 + 180 + 320 - (350 + 500 + 70 + 100 + 120) = Le\,3{,}860\) (debit).
(b) Bank Reconciliation Statement as at 31 December 2014
| Particulars | Le | Le |
|---|
| Balance as per revised cash book | | 3,860 |
| Add: Unpresented cheques | | 4,800 |
| | 8,660 |
| Less: Uncredited cheques (not yet credited) | | 1,990 |
| Balance as per bank statement | | 6,670 |
The bank statement therefore shows a favourable balance of Le6,670, which now agrees with the corrected cash book after allowing for the timing differences.
Workings and treatment
The revised (adjusted) cash book records only the items that the trader had not yet entered but which have already gone through the bank: direct debits, bank charges, standing orders, direct credits, and the correction of the undercast balance. Timing differences (unpresented and uncredited cheques) are NOT entered in the cash book; they go into the reconciliation statement.
(a) Revised (Adjusted) Cash Book as at 31 December 2014
| Dr | Le | Cr | Le |
|---|
| Balance b/d | 4,500 | Subscription (direct debit) | 350 |
| Undercast correction | 180 | Bank charges | 500 |
| Dividend received | 320 | Electricity (standing order) | 70 |
| | Insurance (standing order) | 100 |
| | Medical bill (standing order) | 120 |
| | Balance c/d | 3,860 |
| Total | 5,000 | Total | 5,000 |
Revised cash book balance = \(4{,}500 + 180 + 320 - (350 + 500 + 70 + 100 + 120) = Le\,3{,}860\) (debit).
(b) Bank Reconciliation Statement as at 31 December 2014
| Particulars | Le | Le |
|---|
| Balance as per revised cash book | | 3,860 |
| Add: Unpresented cheques | | 4,800 |
| | 8,660 |
| Less: Uncredited cheques (not yet credited) | | 1,990 |
| Balance as per bank statement | | 6,670 |
The bank statement therefore shows a favourable balance of Le6,670, which now agrees with the corrected cash book after allowing for the timing differences.
