Topic: Bank reconciliations

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FA – May 2012 – L1 – SB – Q4 – Bank Reconciliation

Identify causes of discrepancies between cashbook and bank statement and prepare bank reconciliation.

Question

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:

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.
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.
The bank made e-payment charges of N50,000 on the company’s account.
The receipt side of the cash book was overcast by N100,000 by the account clerk.
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.
E-dividend payments made through the bank by the company amounting to N360,000 were yet to be posted in the company’s cashbook.
A cheque issued for the purchase of office equipment had been entered in the bank statement as N800,000 instead of N300,000.
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)

Answer

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Tags: Bank Reconciliation, Cashbook, Day-to-day Banking
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2012

FA – Nov 2011 – L1 – SA – Q3 – Bank Reconciliation

This question asks about the source document used to identify an uncredited lodgement.

Question

What is the source document by which a bank reconciliation officer can identify an uncredited lodgement?

Answer

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Tags: Bank Reconciliation, Source Documents
Level: Level 1

Topic: Bank reconciliations
Series: NOV 2011

FA – Nov 2020 – L1 – SA – Q20 – Bank Reconciliation

Determines the correct overdraft position after reconciling bank errors.

Question

Bode’s cash book showed he had an overdraft of N20,300. A bank reconciliation, however, indicated that a standing order payment of N3,650 had been entered in the cash book twice, and that a returned customer’s cheque for N2,750 had been debited in the cash account.

What is Bode’s true overdraft position?
A. N12,150
B. N18,450
C. N19,400
D. N21,200
E. N22,150

Answer

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Tags: Bank Reconciliation, Error Correction, Overdraft Position
Level: Level 1

Topic: Bank reconciliations
Series: NOV 2020

FA – Nov 2012 – L1 – SB – Q33 – Bank Reconciliation

Identify items required for cash book adjustment during bank reconciliation.

Question

When preparing a company’s bank reconciliation statement at 31 October 2012, it was discovered that the following items caused the difference between the cash book balance and the bank statement balance:

A. Bank charges N5,005
B. Cheque of N105,000 incorrectly debited by the bank to the account
C. Cheque paid in by the company but dishonoured amounted to N55,500
D. Uncredited lodgement N62,800

Which TWO of the items above will be required for cash book adjustment?

Answer

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

Topic: Bank reconciliations
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 – May 2014 – L1 – SA – Q19 – Bank reconciliations

This question tests knowledge of terminology for guaranteed minimum payments in royalty agreements.

Question

The guaranteed amount payable where the royalty calculated on the basis of actual production falls short of the estimated level is ………………………

Answer

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Tags: Minimum Payments, Revenue Recognition, Royalty Accounting
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2014

FA – May 2014 – L1 – SA – Q7 – Bank reconciliations

This question tests knowledge of items requiring cash book adjustment in bank reconciliation.

Question

During the preparation of your company’s bank reconciliation statement as at 31 October, 2013, you discovered that the following items caused the difference between the cash book balance and bank statement balance:

i. Bank charges N3,502 ii. Uncredited lodgement N75,000 iii. Cheque of N85,500 paid in by the Company but dishonoured iv. Amount of N225,000 incorrectly debited by the bank to the account

Which of the items above will be required for cash book adjustment?

Answer

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

Topic: Bank reconciliations
Series: MAY 2014

FA – May 2014 – L1 – SA – Q5 – Bank Reconciliation

Defines unpresented cheques in accounting.

Question

Which of the following statements best defines unpresented cheques?
A. Cheques paid by the bank but not yet recorded in the cash book
B. Cheques that are yet to be credited to the customer’s account
C. Cheques issued by the business but not yet presented for payment
D. Cheques that are stale and no longer acceptable for payment
E. Cheques that have been returned due to insufficient funds

Answer

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Tags: Bank Reconciliation, Cash Book Adjustments, Unpresented Cheques
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2014

FA – Nov 2015 – L1 – SB – Q5c – Bank Reconciliation

Reconcile accounts receivable ledger control with ledger balances and clear the suspense account.

Question

The trial balance of Mbobo Limited includes the following items:

The following information is available:

The total of debit balances in the accounts receivable ledger is ₦116,374, and the total of credit balances is ₦1,234.
The accounts receivable ledger includes a debit balance of ₦700 for Entity C, and the accounts payable ledger includes a credit balance of ₦800 relating to Entity C. Only the net amount will eventually be paid.
Included in the credit balances in the accounts receivable ledger is a balance of ₦600 in the name of H. Potoka. This arose because a sales invoice for ₦600 had earlier been posted in error from the sales day book to the debit of the account of M. Potoka in the accounts payable ledger.
An allowance of ₦300 granted to a customer for some damaged goods had been omitted from the appropriate account in the accounts receivable ledger. This allowance had been included in the accounts receivable control account.
A cash receipt from a credit customer for ₦345 had been entered in the cash book as ₦245.
The bank balance of ₦1,700 had been included in the trial balance, in error, as an overdraft.
The debit balance on the insurance account in the nominal ledger of ₦3,456 has been included in the trial balance as ₦3,546.

Required:
(i) Prepare a reconciliation of the accounts receivable ledger control account and the accounts receivable ledger balances (8 marks).
(ii) Open a suspense account and post the entries required to clear this account (2 marks).

Answer

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Tags: Accounts Receivable, Control Accounts, Reconciliation, Suspense account
Level: Level 1

Topic: Bank reconciliations
Series: NOV 2015

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 – May 2021 – L1 – SB – Q2a – Bank Reconciliation

Preparation of a contract account showing the costs, revenues, and profit recognized for the period.

Question

The following is a summary of the cash book of Babagana Limited for the month of March 2019.

N’000
Receipts	Payments
22,035	11,930
Balance b/f 18,415	Balance c/d 8,310
30,345	30,345

All receipts are banked and payments made by cheque. On investigation, you discovered that:

Bank charges of N2,040,000 entered on the bank statement had not been entered in the cash book.
Cheques drawn amounting to N4,005,000 had not been presented to the bank for payment.
Cheques received amounting to N11,430,000 had been entered in the cash book and paid into the bank, but had not been credited by the bank until April 2019.
A cheque for N330,000 had been wrongly entered as a receipt in the cash book.
A cheque drawn had been overstated by N375,000.
A cheque of N1,200,000 received had been returned by the bank. No adjustment had been made in the cash book.
All dividends receivable are credited directly to the bank account. During March 2019, amounts totaling N930,000 were credited by the bank and no entries were made in the cash book.
A cheque drawn for N90,000 had been incorrectly entered in the cash book as N990,000.
The bank statement as at 31 March 2019 showed an overdraft of N17,430,000.

Required:

i. The adjustments required in the cash book (5 Marks)
ii. Starting with balance as per bank statement, prepare a bank reconciliation statement as at March 31, 2019. (5 Marks)

Answer

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Tags: Construction, Contract Account, Financial Statement
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2021

FA – May 2021 – L1 – SA – Q7 – Bank Reconciliation

Determine cash received based on bank transactions.

Question

The bank balance in the books of Super on 1 April 2018 was ₦5,000,000 overdraft. The entity made a total payment of ₦13,116,300, the balance at 31 March 2019 was ₦8,145,600. How much cash was received by the entity during the year ended 31 March 2019?
A. ₦9,970,700
B. ₦16,261,900
C. ₦18,116,300
D. ₦21,261,900
E. ₦26,261,900

Answer

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Tags: Bank Reconciliation, Cash Balance, Financial Statements
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2021

FA – May 2023 – L1 – SA – Q7 – Bank Reconciliation

Determining the impact of specific transactions on the bank statement balance.

Question

The bank statement of a trader shows a debit balance before reconciliation with the cash book balance. Which of the following transactions will reduce the balance when necessary adjustments are completed?

A. Dividends received directly by the bank on behalf of the trader

B. Outstanding deposits

C. Unpresented cheques

D. Error committed in the cash book of the trader

E. Dishonoured cheques

Answer

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

Topic: Bank reconciliations
Series: MAY 2023

FA – May 2017 – L1 – SB – Q6a – Bank Reconciliation

Prepare an adjusted cash book and bank reconciliation statement for Payless Ltd.

Question

The Accountant of Payless Limited, on receiving the bank statement of the business for September 2016, noticed a difference between the bank account balance and the bank column of the company’s cash book. On investigation, the accountant found the following:

(i) The bank statement had been debited in error to the tune of N500,000. The error had been discovered by the bank and would be reversed the next working day.
(ii) Cheques amounting to N840,000 paid into the bank were uncleared and yet to be credited to the business bank account.
(iii) Some cheques amounting to N206,500 paid into the bank were dishonoured.
(iv) Standing order of N100,000 with the bank had been effected by the bank.
(v) Dividends for investments amounting to N45,000 had been received directly into the bank account.
(vi) Some of the business debtors had paid directly into Payless Limited’s bank account an amount of N2,485,000.
(vii) Cheques amounting to N520,000 issued to creditors were recorded in the cash book but were yet to be presented to the bank.
(viii) Bank charges were N1,050.
(ix) Interests received from the bank were N4,255.

The balance on the bank column of the cash book was N3,797,268, and the bank statement balance was N5,203,973.

You are required to:

i. Prepare the adjusted cash book. (6 Marks)
ii. Prepare the bank reconciliation statement. (4 Marks)

Answer

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Tags: Adjusted Cash Book, Bank Charges, Bank Reconciliation, Cash Book, Cheques, Standing Order
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2016

FA – Nov 2019 – L1 – SB – Q3 – Bank Reconciliation

Explains the difference between a bank statement and a bank reconciliation statement.

Question

The accounts clerk of Jide Electronics is unsure of the difference between a bank statement and a bank reconciliation statement and has asked for your assistance in this direction.
Required: Explain the difference between a bank statement and a bank reconciliation statement. (2 Marks)

She has provided you with the following summary of banking transactions for the period under review:

A cheque amounting to N280,000 received and paid into the bank was not credited by the bank until after September 30, 2019;
The cash book balance of the business showed an overdraft of N200,000, while the bank statement balance on the same date indicated that the business had a credit balance of N1,930,000;
A customer made a direct credit transfer into the business bank account amounting to N1,140,000 in settlement of trade debt, and this was not known until after the receipt of the bank statement;
A cheque amounting to N670,000 for the purchase of goods was posted into the cash book as N760,000;
A cheque of N1,230,000 dishonoured by the bank remained unreversed in the cash book;
Cheques amounting to N2,680,000 issued to a supplier were presented to the bank on October 08, 2019;
The bank statement revealed that there was a dividend of N580,000 received as investment income;
The bank transferred the sum of N200,000 to ICAN, being the payment on a standing order for annual subscription of staff who were writing professional examinations;

Required:

i. Prepare the adjusted cash book. (11 Marks)
ii. Starting with the balance as per bank statement, prepare the bank reconciliation statement for the month ended September 30, 2019. (7 Marks)

Answer

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

Topic: Bank reconciliations
Series: NOV 2019

FA – May 2017 – L1 – SA – Q20 – Bank Reconciliation

Defines a process that compares two sets of records.

Question

A process that compares TWO sets of records is
A. Reconciliation
B. Posting
C. Casting
D. Balancing
E. Absorption

Answer

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Tags: Balancing, Cash Flow, Posting, Reconciliation
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2016

FA – May 2017 – L1 – SA – Q18 – Bank Reconciliation

Identifies items involving movement in cash flows.

Question

Which of the following items involves movement in cash flows?
A. Amortisation charges
B. Depreciation
C. Gain
D. Loss
E. Rent

Answer

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Tags: Amortization, Cash Flow, Depreciation, Gain and Loss, Rent
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2017

FA – Nov 2019 – L1 – SA – Q18 – Bank Reconciliation

Identify what will not affect the agreement between the cash book balance and the bank statement balance.

Question

Which of the following will not affect the agreement of the cash book balance and the bank statement balance?

A. Dishonoured lodgement
B. Cash payments
C. Bank charges
D. Standing order for the payment of annual subscription
E. Error in the bank statement

Answer

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

Topic: Bank reconciliations
Series: NOV 2019

FA – May 2017 – L1 – SA – Q1 – Bank Reconciliation

Identifies why a bank reconciliation statement is prepared, focusing on error detection and reconciliation of differences.

Question

Which of the following justifies why bank reconciliation statement is prepared?

(i.) Detection of error in the organisation’s cash book

(ii.) Reconciliation of differences arising from delay in clearance of cheques

(iii.) Discourage embezzlement of fund by staff

(iv.) Resolve problems highlighted by the trial balance

A. (i), (ii), (iii) and (iv)
B. (ii)
C. (i) and (ii)
D. (ii), (iii) and (iv)
E. (i), (ii) and (iii)

Answer

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Tags: Bank Reconciliation, Cash Book, Error Detection, Reconciliation
Level: Level 1

Topic: Bank reconciliations
Series: MAY 2017

FA – May 2016 – L1 – SA – Q10 – Bank Reconciliation

A question on interpreting the meaning of a credit balance in the cash book.

Question

The bank column in the cash book shows a credit balance of N50,000. This means:
A. A total payment of N50,000
B. A gross receipt of N50,000
C. A balance of N50,000 in the bank
D. An overdraft of N50,000
E. A balance of N50,000 cash

Answer

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Tags: Bank Balance, Cash Book, Overdraft
Level: Level 1