On 31 December 2016, the bank column of the cash book of Aminata Enterprise showed a debit balance of D48,500. However, the bank statement showed a credit balance of D54,900 on the same date. A detailed comparison of entries revealed the following;
i. customer's cheques amounting to D8.450 had not been credited by the bank as at 31/12/2016.
ii. Cheques amounting to D8,850 had not been presented for payment as at 31/12/2016
iii. Bank charges of D1,000 and interest on investments of D2,500 collected by the banker appeared only in the bank statement.
iv. On 30/12/2016, there was a wrong credit of D3,000 in the bank statement.
v. Kesse Enterprise, a customer, had paid into the bank directly a sum of D3,000 on 29th December 2016. This had not been recorded in the cash book.
vi. A cheque for D2,000 received from Jallo Enterprises, a customer, which was deposited had been returned unpaid. This had not been entered in the cash book.
You are required to:
(a) Write up the adjusted cash book.
(b) Prepare a bank reconciliation statement as at 31/12/ 2016.
Approach. First adjust the cash book for items the firm itself failed to record (charges, direct credits, dishonoured cheques, interest). Then reconcile the corrected cash-book balance to the bank statement using timing differences (unpresented and uncredited cheques) and any bank error.
(a) Adjusted (Updated) Cash Book
| Dr | D | Cr | D |
|---|
| Balance b/d | 48,500 | Bank charges | 1,000 |
| Interest on investments | 2,500 | Dishonoured cheque (Jallo) | 2,000 |
| Direct payment (Kesse) | 3,000 | Balance c/d | 51,000 |
| 54,000 | | 54,000 |
(b) Bank Reconciliation Statement as at 31st December 2016
| Particulars | D | D |
|---|
| Balance as per adjusted cash book | | 51,000 |
| Add: Unpresented cheques | 8,850 | |
| Add: Wrong credit in bank statement | 3,000 | 11,850 |
| | 62,850 |
| Less: Uncredited cheques | | (8,450) |
| Balance as per bank statement | | 54,400 |
Reasoning on each item. Bank charges (1,000) and the dishonoured Jallo cheque (2,000) reduce the cash book; interest collected (2,500) and Kesse's direct lodgement (3,000) increase it. Unpresented cheques (8,850) mean the bank balance is higher than the cash book, so they are added; the wrong credit of 3,000 also inflates the bank statement, so it is added; uncredited customer cheques (8,450) have not yet reached the bank balance, so they are deducted.
Note. The statement reconciles to D54,400. The bank statement figure quoted in the question (D54,900) differs by D500, which points to a data slip in the question; the method and treatment above are correct.
Approach. First adjust the cash book for items the firm itself failed to record (charges, direct credits, dishonoured cheques, interest). Then reconcile the corrected cash-book balance to the bank statement using timing differences (unpresented and uncredited cheques) and any bank error.
(a) Adjusted (Updated) Cash Book
| Dr | D | Cr | D |
|---|
| Balance b/d | 48,500 | Bank charges | 1,000 |
| Interest on investments | 2,500 | Dishonoured cheque (Jallo) | 2,000 |
| Direct payment (Kesse) | 3,000 | Balance c/d | 51,000 |
| 54,000 | | 54,000 |
(b) Bank Reconciliation Statement as at 31st December 2016
| Particulars | D | D |
|---|
| Balance as per adjusted cash book | | 51,000 |
| Add: Unpresented cheques | 8,850 | |
| Add: Wrong credit in bank statement | 3,000 | 11,850 |
| | 62,850 |
| Less: Uncredited cheques | | (8,450) |
| Balance as per bank statement | | 54,400 |
Reasoning on each item. Bank charges (1,000) and the dishonoured Jallo cheque (2,000) reduce the cash book; interest collected (2,500) and Kesse's direct lodgement (3,000) increase it. Unpresented cheques (8,850) mean the bank balance is higher than the cash book, so they are added; the wrong credit of 3,000 also inflates the bank statement, so it is added; uncredited customer cheques (8,450) have not yet reached the bank balance, so they are deducted.
Note. The statement reconciles to D54,400. The bank statement figure quoted in the question (D54,900) differs by D500, which points to a data slip in the question; the method and treatment above are correct.
