Question Tag: Cash Book

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FA – Nov 2012 – L1 – SB – Q4 – Financial Statements Preparation

Prepare a bank cash book, retained earnings, and statement of financial position for Fehintola Enterprises.

Question

On 1 January 2011, Mrs. Fehintola decided to invest her retirement benefit of N1,000,000 in the wholesale business of Fehintola Enterprises. She lodged the amount into the business bank account and paid for the following by cheque:

Motor Van: N600,000
Warehouse fittings: N340,000
Rent: N12,500

Proper accounting records were not kept, but the financial position as at 31 December 2011 revealed the following:

Inventories of goods in the warehouse: N150,000
Trade receivables: N125,000
Cash at Bank: N751,750
Trade payables for supplies: N100,000
Accrued rent: N15,000

The following were paid for by cheque:

Electricity bill at N2,500 per quarter up to 31 March 2012
Suppliers: N1,500,000
Personal expenses: N150,000

On 31 December 2011, it was agreed that the Motor Van and Warehouse fittings should be valued at N560,000 and N320,000, respectively.

Required:

a. Prepare the Bank Cash Book (5 Marks)
b. Prepare a statement showing the retained earnings for the year ended 31 December 2011 (5 Marks)
c. Prepare the Statement of Financial Position as at 31 December 2011 (5 Marks)

Answer

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Tags: Bank Accounts, Cash Book, Financial Statements, Retained Earnings
Level: Level 1

Topic: Financial Statements Preparation
Series: NOV 2012

FA – Nov 2012 – L1 – SA – Q8 – Bank Reconciliation

Identifying the cause of discrepancy between the cash book and the bank statement.

Question

Which of the following does NOT cause a discrepancy between cash book and bank statement balances?

A. Direct credit found in the bank statement
B. Credit sales posted to the debit side of the cash book (bank column)
C. COT and other finance costs credited in the bank statement
D. The company’s credit balance in the bank statement
E. Subscription paid by the bank on behalf of the company’s manager and debited in the bank statement

Answer

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Tags: Bank Statement, Cash Book, Discrepancy, Reconciliation
Level: Level 1

Topic: Bank reconciliations
Series: NOV 2012

FA – Nov 2015 – L1 – SB – Q2 – Bank Reconciliation

Preparing an adjusted cash book and bank reconciliation for a club with discrepancies.

Question

a. Bank Statement is a mirror of any entity’s cash book, and they are expected to have equal balances at any point in time. However, this is not usually the case. Based on the ongoing statement, state five reasons that could cause the bank statement balance to differ from the cash book balance. (5 Marks)

b. The Treasurer of Young Star Social Club (YSSC) did not keep proper records for receipts and payments for the month of December 2014, causing mistrust among members. He has decided to seek your assistance to prepare a bank reconciliation statement before presenting the account to the club members.

The bank statement and the receipts and payments cash book of the club on December 31, 2014, showed a credit balance of N205,000 and N2,078,000, respectively. A comparison of the bank statement with the receipts and payment cash book of the club revealed the following:

i. Cheque drawn but not presented N3,160,000
ii. Amount lodged in the bank but not credited N725,000
iii. Entries in bank statement not recorded in receipts and payments cash book:

Standing order for loan refund N35,000
Interest received on deposit account N18,000
Bank charges N15,000
Cheque paid-in but returned with “refer to drawer” N120,000

Required:
i. Prepare an adjusted cash book as at December 31, 2014; (8 Marks)
ii. Prepare the Bank Reconciliation Statement showing the balance on December 31, 2014. (7 Marks)

(Total 20 Marks)

Answer

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Tags: Adjustments, Bank Statement, Cash Book, Reconciliation
Level: Level 1

Topic: Bank reconciliations
Series: NOV 2015

FA – Nov 2015 – L1 – SA – Q16 – Recording Financial Transactions (Including Source Documents, Books of Prime Entry, and Cash Books)

This question identifies the items that should be included in an adjusted cash book.

Question

Which of the following should be included in the adjusted cash book?
A. Cheque issued, presented and cashed
B. Opening bank balance
C. Bank charges and commission
D. Bank deposit
E. Cash payment made by the firm

Answer

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Tags: Accounting principles, Bank Adjustments, Cash Book
Level: Level 1

FA – Nov 2015 – L1 – SA – Q12 – Recording Financial Transactions

This question identifies which document is not used to update a Cash Book.

Question

Which of the following is NOT a source document used to update a Cash Book?
A. Cheque stub
B. Payment voucher
C. Receipts
D. Paying-in-slip
E. Debit note

Answer

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Tags: Accounting principles, Cash Book, Source Documents
Level: Level 1

FA – May 2018 – L1 – SB – Q1 – Recording Financial Transactions

Prepares a three-column cash book, ledger accounts, and a trial balance for a sole trader.

Question

On January 1, 2016, Mr. Wale commenced business as a sole trader with N10,000,000, which he paid into the business bank account. He purchased a van for N6,000,000 from Mallam Tanko and paid half of the amount due by cheque on January 2, 2016. The following transactions took place in the month of January 2016:

Jan 2: Paid rent of N500,000 for two years in advance for the business premises by cheque.
Jan 3: Purchased goods worth N2,000,000 from Granules Limited and paid half of the amount by cheque so as to enjoy a cash discount of 4%.
Jan 4: Purchased furniture for N200,000 and computers for N250,000 by cheque.
Jan 6: Conducted sales promotion for one month, offering cash and trade discounts as follows:
- 5% discount on cash sales
- 10% trade discount for sales above N500,000
Jan 8: Sold goods for cash to Sanders Limited for N340,000.
Jan 10: Sold goods to Miles and Stone Limited for N1,000,000, who paid 75% by cheque.
Jan 12: Mr. Bobby purchased goods valued at N100,000 and paid in full by cash.
Jan 13: Deposited N300,000 cash in the bank.
Jan 15: Paid salaries by cheque (N80,000) and electricity bill by cheque (N10,000).
Jan 20: Paid the sum of N1,750,000 to Mallam Tanko for the van by cash.
Jan 27: Mr. Wale withdrew N10,000 for personal expenses.
Jan 30: Cash sales of N40,000 were made.

Required:
a. Prepare a three-column cash book. (6 Marks)
b. Prepare the ledger accounts for the transactions. (8 Marks)
c. Prepare a trial balance as at January 31, 2016. (6 Marks)

Answer

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Tags: Cash Book, Ledger Accounts, Trial Balance
Level: Level 1

FA – Nov 2021 – L1 – SA – Q15 – Bank Reconciliation

This question focuses on which bank reconciliation items should not be adjusted in the cash book.

Question

Which of the following bank reconciliation items should NOT be added or subtracted from the cash book balance to determine the adjusted bank balance?
A. Bank service charges
B. Unpresented cheques
C. Direct transfer
D. Cash book error
E. Value added tax charges

Answer

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Tags: Bank Reconciliation, Cash Book, Multiple Choice
Level: Level 1

Topic: Bank reconciliations
Series: NOV 2021

FA – Nov 2021 – L1 – SA – Q13 – Accounting Concepts

This question requires calculating the amount of cash paid out during a period.

Question

In a cash book, the opening balance was N70,600, closing balance was N86,600 and the total cash received during the period was N180,000. What was the amount of cash paid out during the period?
A. N89,000
B. N98,000
C. N146,000
D. N164,000
E. N186,000

Answer

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Tags: Cash Book, Cash Flow, Multiple Choice, Payments
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2021

FA – Nov 2021 – L1 – SA – Q11 – Trial Balance

This question evaluates the treatment of discounts in the cash book and their impact on the trial balance.

Question

If the total discount allowed in a cash book was N52,000 and the total discount received was N66,700, which of the following is TRUE concerning the two discounts?
A. They should not appear in the trial balance as they were already either received or paid out
B. They must be balanced in the cash book and the difference taken to the receivables
C. They must not appear in the general ledger
D. They must be balanced in the cash book and the difference taken to the trial balance
E. They should not be balanced in the cash book before being taken to the trial balance

Answer

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Tags: Cash Book, Discounts, Multiple Choice, Trial Balance
Level: Level 1

Topic: Trial Balance: Usefulness and Limitations
Series: NOV 2021

FA – Nov 2021 – L1 – SA – Q4 – Accounting Concepts

This question relates to the ledger entry for a vehicle purchased on cash.

Question

Success Motors bought three Toyota Jeeps on cash at the cost of N16,000,000. On debiting the vehicle account, the corresponding credit for the purchase will appear in the:
A. Sales day book
B. Purchase day book
C. Payable account
D. Cash book
E. Purchases account

Answer

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Tags: Business Transactions, Cash Book, Multiple Choice, Vehicle Purchase

Topic: Accounting Concepts
Series: NOV 2022

FA – Mar 2024 – L1 – Q3b – Bank reconciliations

Prepare an adjusted cash book and a bank reconciliation statement following identified errors.

Question

The accountant of Abeiku Ltd has prepared a trial balance but found that the total of debit balances is GH¢691,680 and the total of credit balances is GH¢689,720.

On investigation, the following errors were discovered in the book-keeping:

Total purchases were recorded at GH¢80 below their correct value, although the total value of trade payables was correctly recorded.
Total telephone expenses were recorded at GH¢800 above their correct amount, although the total value of the amounts payable was correctly recorded.
Purchase returns of GH¢440 were recorded as a debit entry in the sales returns account, but the correct entry had been made in the trade payables control account.
Equipment costing GH¢1,600 had been recorded as a debit entry in the repairs and maintenance account.
Rental expenses of GH¢4,392 were entered incorrectly as GH¢4,932 in the expense account but were entered correctly in the bank account in the ledger.
Bank charges of GH¢160 have been omitted entirely from the ledger.

Required:

i) Prepare journal entries for the correction of the errors. (6 marks)

Answer

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Tags: Adjustments, Bank Reconciliation, Cash Book, Errors
Level: Level 1

Topic: Bank reconciliations
Series: MAR 2024

FA – Mar 2024 – L1 – Q3a – Bank reconciliations

Prepare a bank reconciliation statement and an adjusted cash book for Malik & Company.

Question

i) Mr. Malik is a sole trader and carries on business under the name “Malik & Company”. The balance on his cash book at 31 December 2023 did not agree with the balance as per the bank statement, which shows a credit balance of GH¢183,750.

An examination of the cash book and bank statement disclosed the following:

A deposit of GH¢24,600 made on 29 December 2023 and recorded in the cashbook had been credited by the bank on 1 January 2024.
Bank charges of GH¢850 have not been entered in the cash book.
A debit of GH¢2,100 appeared on the bank statement for an unpaid cheque which had been returned marked “out of date”. The cheque was re-dated by his customer and paid into the bank again on 3 January 2024. The earlier transaction was recorded in the cashbook.
A standing order for payment of an annual subscription amounting to GH¢500 has not been entered in the cash book.
On 26 December 2023, Mr. Malik had given the cashier a cheque for GH¢5,000 to pay into his personal account at the bank. The cashier deposited it into the business account by mistake.
On 27 December 2023, a customer had made an online transfer of GH¢24,950 in payment against goods supplied. The advice was received and recorded in the cash book on 2 January 2024.
On 30 September 2023, Mr. Malik entered into a hire purchase agreement and issued a standing order to the bank to pay a sum of GH¢1,300 on day 10 of each month, commencing from October 2023. No entries have been made in the cash book for these payments.
A cheque for GH¢18,200 received from Mr. Adoboe had been entered twice in the cash book.

Required:

i) Prepare the adjusted cash book for Malik & Company in a format which clearly indicates whether each entry is a debit or credit. (7 marks)

ii) Prepare a reconciliation of the bank statement balance to the adjusted cash book balance. (7 marks)

Answer

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Tags: Adjustments, Bank Reconciliation, Cash Book, Errors, Internal Controls
Level: Level 1

Topic: Bank reconciliations
Series: MAR 2024

FA – Nov 2023 – L1 – Q3b – Bank reconciliations

Prepare an adjusted cash book and reconcile it with the bank statement for Mensah's account.

Question

b) Mensah is preparing his bank reconciliation for the month of June 2022. His bank statement shows a balance of GHȼ1,824 cash at the bank. The balance on the cashbook in his general ledger is GHȼ645 (credit).

He has identified the following reasons for the difference:

The bank has credited the account in error with GHȼ485, which belongs to another customer.
A cheque drawn, amounting to GHȼ345, has been entered in the cashbook as GHȼ354.
Bank charges of GHȼ320 on the bank statement have not been entered in the cashbook.
Cheques totalling GHȼ664 have been correctly entered on the debit side of the cashbook but have not been paid in at the bank.
A customer’s cheque for GHȼ460 was returned by Mensah’s bank in June as the customer had insufficient funds in his account. Mensah has not recorded the return of the cheque in his records.
Six cheques have not yet been presented at the bank. These are:

Cheque No.	Amount (GHȼ)
845763	550
845739	1,540 (see note 7)
846435	480
846502	380
846548	269
846582	200
Total	3,419

Cheque number 845739 was lost and was cancelled. Mensah has not recorded the cancellation of the cheque.

Required:

i) Prepare the adjusted cashbook for Mensah in a format which clearly indicates whether each entry is a debit or credit. (7 marks)

ii) Prepare a reconciliation of the bank statement balance to the adjusted cashbook balance. (7 marks)

Answer

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Tags: Adjusted Cash Book, Bank Reconciliation, Cash Book, Reconciling Items
Level: Level 1

Topic: Bank reconciliations
Series: NOV 2023

FA – Nov 2023 – L1 – Q3a – Bank reconciliations

Explain reasons for conducting a bank reconciliation and identify items that may appear in a bank reconciliation statement.

Question

i) Explain THREE (3) reasons for carrying out a bank reconciliation. (3 marks)

ii) State THREE (3) items which may appear in the bank reconciliation statement. (3 marks)

Answer

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Tags: Bank Reconciliation, Bank Statement, Cash Book, Reconciling Items
Level: Level 1

Topic: Bank reconciliations
Series: NOV 2023

FA – Mar 2023 – L1 – Q3 – Bank reconciliations | Correction of errors

Prepares an adjusted cash book and bank reconciliation statement, corrects errors through journal entries, and updates the suspense account.

Question

a) Markson’s & Co.’s cash book balance and bank statement balance at 31 March 2021 do not agree. The following information has been provided to help reconcile the difference:

The balance per the bank statement is GH¢10,000 while that of the cash book is GH¢3,300.
A cheque of GH¢6,000 issued to a supplier on 30 March 2021 was still in the supplier’s possession.
Insurance paid by the bank is GH¢400. This is yet to be recorded in the cash book.
An outgoing cheque of GH¢2,000 was recorded twice in the cash book. It is accurately recorded in the bank statement.
Payment of a GH¢1,000 cheque is recorded twice in the bank statement.
The bank statement recorded an amount of GH¢1,200 as dividends received from Kankam Ltd. There is no such transaction in the cash book.
A cheque of GH¢1,000 received from a customer was deposited at the bank on 29 March 2021, but this amount has not yet reflected in the bank statement.
Bank charges in the bank statement amounted to GH¢100.

Required:
i) Prepare an adjusted cash book to record transactions omitted. (4 marks)
ii) Prepare a bank reconciliation statement to agree the bank statement balance with the balance arrived at in (i) above. (4 marks)

b) The trial balance of Askat Enterprises as at 31 December 2021 failed to agree. A suspense account was opened for the difference. Draft final accounts were prepared that revealed a net profit of GH¢80,000 for the year ended 31 December 2021. The following errors were subsequently discovered:

The purchases day book total of GH¢160,000 had been posted to the ledger as GH¢320,000.
The sales account has been understated by GH¢240,000.
Discounts received of GH¢14,000 had been debited to discounts allowed account.
An accrued salary and wages of GH¢12,000 was omitted.
Loose tools bought for GH¢8,000 had been debited to the purchases account.
Purchases of inventory for GH¢140,000 had not been posted to the ledger.
Bad debts of GH¢19,000 written off in the trade receivables account had not been treated in the expense account.
The proprietor had withdrawn goods worth GH¢6,000 for personal use. No entries had been made in the books.

Required:
i) Prepare the journal entries to correct the errors. (6 marks)
ii) Prepare the suspense account and show the difference in the books. (3 marks)
iii) Prepare a statement to show the correct net profit for the year. (3 marks)

Answer

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Tags: Bank Reconciliation, Cash Book, Error Correction, Suspense account
Level: Level 1

Topic: Bank reconciliations, Correction of errors
Series: MAR 2023

FA – May 2021 – L1 – Q3 – Bank reconciliations

Preparation of an adjusted cash book, bank reconciliation statement, and explanation of the petty cash book operations.

Question

a) On 4 April 2020, Kofi Ntam received his bank statements for the month ended 31 March 2020. The bank statement showed a balance of GH¢417,400 (overdraft) as at 31 March, whilst the cash book showed a balance of GH¢525,990 (credit) as at that date. Upon examination of the cash book and the bank statement, the following were discovered:

Bank charges of GH¢2,010 had not been recorded in the cash book.
Kofi Ntam exceeded his overdraft limit during the month of March. The bank had therefore charged a penalty of GH¢2,500. This has not been recorded in the cash book.
A sum of GH¢12,500 had been wrongly credited to Kofi Ntam’s bank account by the bank.
A cheque for GH¢12,300 had been returned by the bank as dishonored. As the cheque had been dishonored, the bank charged Kofi Ntam GH¢150. This has not reflected in the cash book.
Cash receipts of GH¢37,400 were posted as cash payment of GH¢47,300 in the cash book.
On 21 March, Kofi Ntam deposited an amount of GH¢6,500 into his personal bank account. This was deposited to the business bank account in error by the bank.
Standing orders and direct debits of GH¢11,150 had not been posted to the cash book.
Customers had deposited GH¢21,700 directly to the bank account. This has not been recorded in the cash book.
Receipts of GH¢51,200 deposited to the bank account on 31 March 2020, had not been credited by the bank.
The following cheques, drawn on the bank account, had not been presented to the for payment as at 31 March 2020:

Cheque Number	Date Cheque was Written	Amount (GH¢)
No. 45280	11 March 2020	8,400
No. 45350	28 March 2020	17,400
No. 45370	31 March 2020	36,700

Required:
i) Prepare the adjusted cash book for the month of March 2020.
(8 marks)

ii) Prepare a statement on 31 March 2020 reconciling the adjusted cash book with the bank statement balance.
(6 marks)

iii) Explain TWO (2) reasons for preparing bank reconciliation on a regular basis.
(2 marks)

b) A petty cash book is created to facilitate small payments in a business or organization. It is meant to meet the day-to-day expenses and it is entrusted into the hands of the petty cashier.

Required:
Prepare a brief note to Kofi Ntam explaining how the petty cash book operates.
(4 marks)

Answer

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Tags: Adjusted Cash Book, Bank Reconciliation, Cash Book, Petty Cash
Level: Level 1

Topic: Bank reconciliations

FA – Nov 2020 – L1 – Q3 – Bank reconciliations | Correction of errors

Question on correcting errors in journal entries, preparing a suspense account, adjusting proprietor's profit, and reconciling a cash book with the bank statement.

Question

a) K. Avuledor is a sole trader with a small business. The trial balance extracted as at 31 December 2018 failed to agree. The credits exceeded the debits by GH¢26,180. A detailed examination of the books was undertaken, and the following issues were uncovered:

No entry had been made for expenses paid with cash from the petty cash till. The expenses amounted to GH¢826.
Discount received of GH¢770 was debited to discounts allowed. The entry in the payables personal account was correct.
Sales returns of GH¢6,860 were treated correctly in the customer’s account and credited to the sales returns account as GH¢6,230.
The total in the purchases day book of GH¢120,050 was debited to the purchases returns account.
The bookkeeper forgot to post the wages and salaries journal for December 2018. No payment has yet been made to employees or the Statutory Authorities. The relevant figures are as follows:
- Wages and salary costs (gross) – GH¢71,050
- Employers Social Security – GH¢6,300
- Employee income taxes (PAYE) – GH¢21,315
A sales invoice of GH¢7,350 was entered in the sales day book as GH¢6,650.
A payment for building repairs of GH¢7,315 was credited to both the Buildings account and the cash account.

Required:
i) Prepare journal entries, with appropriate narratives, necessary to correct the above errors.
(7 marks)

ii) Prepare a suspense account to clear the difference.
(3 marks)

iii) Prepare a working schedule showing the effect on the proprietor’s loss in correcting each of the above errors assuming that the loss before these adjustments was GH¢293,090.
(4 marks)

b) The cash book balance of Armah and Co. disclosed a debit balance of GH¢5,700, which did not agree with the closing favorable bank statement balance of GH¢3,350. The following were discovered during the reconciliation:

Cheques received from customers settling their debts amounting to GH¢18,500 were still in the cashier’s drawer.
GH¢800 standing order for the payment of electricity charges was paid by the bank. This has not been recorded in the books of Armah and Co.
Cheque book charge of GH¢50 is yet to be booked by Armah and Co.
The bank had debited Armah and Co in error of GH¢1,000.
A credit transfer of GH¢5,500 had been made in favor of Armah and Co. This has not been adjusted in the cash book.
As at 31 December 2019, cheques totaling GH¢12,500, which were recorded by Armah and Co as paid to suppliers, had not been presented to the bank for payment.

Required:
Prepare an adjusted cash book for Armah and Co and reconcile the adjusted cash book balance with the bank statement balance of GH¢3,350.
(6 marks)

Answer

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Tags: Bank Reconciliation, Cash Book, Journal Entries, Profit Adjustment, Suspense account
Level: Level 1

Topic: Bank reconciliations, Correction of errors
Series: NOV 2020

FA – May 2020 – L1 – Q3 – Bank reconciliations | Correction of errors

This question involves preparing an adjusted cash book, reconciling it with the bank statement, and explaining the reasons for regular bank reconciliation.

Question

a) On 15 October 2019, Mr. Ladzagla received his bank statement for the month ended 30 September 2019. The statement showed a balance of GH¢208,700 (overdraft) as at 30 September, while the cash book showed a balance of GH¢262,995 (credit) as at that date.

On examination of the cash book and the bank statement, the following were discovered:

i) Mr. Ladzagla exceeded his overdraft limit during the month of September. The bank had therefore charged him a penalty of GH¢1,250. This has not been effected in the cash book.
ii) A sum of GH¢6,250 had been credited to Ladzagla’s bank account in error by the bank.
iii) Bank charges of GH¢1,005 had not been recorded in the cash book.
iv) A cheque for GH¢6,150 had been returned by the bank as dishonoured. Due to the dishonoured cheque, the bank charged Ladzagla GH¢75. Both the dishonoured cheque and the fee charged have not been effected in the cash book.
v) Cash receipts of GH¢18,700 were posted as cash payment of GH¢23,650 in the cash book.
vi) On 21 September, Mr. Ladzagla lodged cash of GH¢3,250 to his personal bank account. This was lodged into the business bank account in error by the bank.
vii) Standing order and direct debits of GH¢5,575 had not been posted to the cash book.
viii) Payment of GH¢10,850 received from customers had been lodged in the bank account but is yet to be posted to the cash book.
ix) Lodgements of GH¢25,600 to bank on 30 September 2019 had not been credited by the bank.
x) The following cheques drawn on the bank accounts had not been presented to the bank for payment as at 30 September 2019:

Cheque Number	Date cheque was written	Amount (GH¢)
No. 3528	11 September 2019	4,200
No. 3535	28 September 2019	8,700
No. 3557	30 September 2019	18,350

Required:
i) Prepare the adjusted cash book for the month of September 2019. (8 marks)
ii) Prepare a statement on 30 September 2019 reconciling the adjusted cash book with the bank statement balance. (8 marks)
iii) State TWO (2) reasons for preparing bank reconciliation on a regular basis. (4 marks)

Answer

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Tags: Bank Reconciliation, Cash Book, Errors, Financial Statements
Level: Level 1

Topic: Bank reconciliations, Correction of errors
Series: MAY 2020

FA – May 2019 – L1 – Q2 – Bank reconciliations | Control accounts and account reconciliations

Prepare an adjusted cash book and bank reconciliation statement, and explain errors detected by trial balance and reasons for having control accounts.

Question

a) A bank reconciliation statement matches the cash balance on a company’s cash book to the corresponding amount on its bank statement. Reconciling the two accounts helps determine if accounting changes are needed. Bank reconciliations are completed at regular intervals to ensure that the company’s cash records are accurate. They also help detect fraud and any cash manipulations.

Required:
Identify FOUR (4) features of a bank reconciliation statement.
(4 marks)

b) Nyantakyi Ltd (Nyantakyi) was preparing its reconciliation for the month of November 2018 and noted a difference between its bank statement balance and the balance on the bank account in its general ledger. The bank statement shows a balance of GH¢1,596 cash at the bank, while the bank account in the general ledger shows a balance of GH¢1,022 overdrawn.

The following information was discovered:

i) The bank debited the company’s account with GH¢7,028 for a cheque previously drawn, but the cheque had not yet been presented.
ii) A cheque deposit of GH¢5,950 on 28 November 2018 was not credited by the bank until 2 December 2018.
iii) A cheque of GH¢1,540 incorrectly credited by the bank to Nyantakyi’s account was later reversed by the bank.
iv) A bank loan of GH¢8,000 was credited to Nyantakyi’s account but was not recorded in the cash book.
v) Bank charges of GH¢130 had not been recorded in the cash book.
vi) An interest charge of GH¢60 was debited by the bank but was not recorded in the cash book.

Required:
i) Prepare the adjusted cash book for Nyantakyi Ltd for the month of November 2018. (5 marks)
ii) Prepare the bank reconciliation statement for Nyantakyi Ltd as at 30 November 2018. (5 marks)

c)
i) Errors that can be detected by the trial balance are:

Transposition: A transposition error occurs when digits in a transaction are reversed. For example, recording 654 instead of 564. This can affect the trial balance.
Omission: An omission error occurs when an entry is completely left out. If it’s a one-sided entry, it will affect the trial balance. (2 marks)

ii) Reasons for having control accounts:

They provide a check on the accuracy of entries made in personal accounts in the receivables and payables ledger.
Control accounts assist in the location of errors.
They provide a quick summary of transactions recorded in individual accounts. (3 marks)

Answer

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Tags: Bank Reconciliation, Cash Book, Control Accounts
Level: Level 1

Topic: Bank reconciliations, Control accounts and account reconciliations
Series: MAY 2019

FA – Nov 2017 – L1 – Q3 – Correction of errors

Identification and correction of errors in the trial balance for AB Ltd, including suspense account adjustments, corrected profit or loss, and balance reconciliation.

Question

The trial balance drawn up for the year ended 31 December 2016 for AB Ltd failed to agree with a difference of GH¢7,200. The difference was credited to the suspense account pending investigations.

During 2017 the following errors were identified:

GH¢10,000 received from the sale of old machinery has been entered in the sales account.
The purchase day book has been overstated by GH¢16,000.
Goods taken by the owner for personal use GH¢12,000 have not been recorded.
Bank charges of GH¢4,800 have not been entered in the cash book.
A discount allowed of GH¢4,500 has been debited to discount received account.
The figure for wages in the trial balance, GH¢40,000, has been entered as GH¢4,000.
A cheque payment of GH¢24,000 for stationery has been debited to the purchase account.

Required:

Prepare the necessary journal entries to correct the errors above. (8 marks)
Draw up the suspense account after correcting the errors. (3 marks)
Prepare the corrected profit or loss account for AB Ltd for the year ended 31 December 2016. (3 marks)

b) The cash book of Lexis Limited as at 31 December 2016 discloses a balance of GH¢18,450
which did not agree with the bank statement balance. Investigation revealed the following:
 Cheques received of GH¢52,000, GH¢5,000 and GH¢12,450 were still in the business drawer.
 GH¢1,200 and GH¢1,800 standing orders for the payment of Electricity charges and Insurance
respectively were paid by the bank but this has not been recorded in the cash book of Lexis
Limited.
 The bank charged GH¢150 for a cheque book issued to Lexis Ltd.
 The bank has wrongly debited a cheque of GH¢4,955 into Lexis Ltd account which should
have been placed in another customers account.
 A credit transfer of GH¢5,000 had been made in favour of Lexis Ltd. The transfer has not been
recorded in the cash book.
 A cheque of GH¢70,000 drawn by Lexis limited was correctly entered in the cash book but
debited to the bank statement as GH¢7,000
 The following cheques which were paid in November 2016 had not been presented :
GH¢
00001142: 2,000
00001168: 5,000
00001190: 4,655

Required:
Prepare
i) The adjusted cash book
ii) A statement to reconcile the balance in (i) above to the bank statement balance

Answer

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Tags: Cash Book, sales account, Trial Balance
Level: Level 1

Topic: Correction of errors
Series: NOV 2017

Question Tag: Cash Book

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