Question Tag: Day-to-day Banking

The general day-to-day banking activities of business enterprises are bound to generate large volumes of transactions to the extent that there are always disagreements between the bank balance shown in the accounts of an organisation and the balance shown in the bank statement.

(a) You are required to state any FIVE causes of disagreement between the cash book balance and the bank statement.
(5 marks)

(b) The cashbook of Ecobiz Plc showed an overdraft of N180,000 on 31 March 2011 while the bank statement balance was an overdraft of N1.6m. On checking the two records, you made the following discoveries:

1. Cheques drawn in respect of payment made to suppliers amounting to N250,000 had been entered in the cash book but were yet to be presented to the bank.
2. Ecobiz Plc instructed the bank to transfer interest of N40,000 due on its bank deposit account to the current account and this was not effected by the bank until April 2011 whereas the entries have been made in the cash book.
3. The bank made e-payment charges of N50,000 on the company’s account.
4. The receipt side of the cash book was overcast by N100,000 by the account clerk.
5. Cheques received and deposited to the bank which amounted to N480,000 had been entered in the cash book but had not been credited by the bank.
6. E-dividend payments made through the bank by the company amounting to N360,000 were yet to be posted in the company’s cashbook.
7. A cheque issued for the purchase of office equipment had been entered in the bank statement as N800,000 instead of N300,000.
8. A cheque for N70,000 issued to one of the suppliers included in (i) above had been erroneously posted on the wrong side of the cash book (i.e. the receipt side).

Prepare the adjusted cash book and a statement reconciling the amended balance with that shown in the bank statement.
(10 marks)