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 – 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 – Nov 2019 – L1 – Q3 – Bank reconciliations

Prepare bank reconciliation, adjust the cash book, and explain the reasons for bank reconciliation preparation.

Question

Yevugah has provided you with the following bank statement and bank account details in respect of the month ended 31 January 2018.

Statement Date: 31 January 2018
Account No: 13456892

Date	Particulars	Debit (GH¢)	Credit (GH¢)	Balance (GH¢)
01-Jan-18	Balance forward			55,940 Cr
03-Jan-18	Cheque 596	2,500		53,440 Cr
03-Jan-18	Lodgement		14,140	67,580 Cr
06-Jan-18	Cheque 597	120		67,460 Cr
06-Jan-18	Direct debit	2,020		65,440 Cr
12-Jan-18	Credit transfer		4,660	70,100 Cr
13-Jan-18	Cheque 600	1,420		68,680 Cr
14-Jan-18	Cheque 601	12,028		56,652 Cr
16-Jan-18	Lodgement		9,000	65,652 Cr
19-Jan-18	Cheque 599	18,004		47,648 Cr
23-Jan-18	Bank charges for December 2017	422		47,226 Cr
25-Jan-18	Quarterly interest received		62	47,288 Cr
27-Jan-18	Dishonoured cheque	1,600		45,688 Cr
27-Jan-18	Cheque 598	26,090		19,598 Cr
30-Jan-18	Cheque 603	5,048		14,550 Cr
31-Jan-18	Lodgement		14,500	29,050 Cr
31-Jan-18	Standing order: rent first quarter 2018	27,000		2,050 Cr

The books and records of Yevugah show the following transactions through the bank account for the month of January 2018:

Required:

a) Prepare Yevugah’s adjusted cash book including the necessary correcting entries as at 31 January 2018. (The answer format must clearly indicate whether each entry is a debit or credit). (10 marks)

b) Prepare a bank reconciliation as at 31 January 2018. (4 marks)

c) Explain TWO (2) reasons for preparing a bank reconciliation. (6 marks)

Answer

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Tags: Bank Reconciliation, Financial Statements, Suspense Accounts
Level: Level 1

Topic: Bank reconciliations
Series: NOV 2019

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 2018 – L1 – Q1 – Bank reconciliations | Correction of errors

Correct errors using a suspense account and prepare a bank reconciliation statement.

Question

a) State and explain TWO (2) errors that will not affect the balancing of the trial balance. (4 marks)

b) The trial balance of Pak Ltd has an excess of credit over debit of GH¢12,500. A suspense account has been opened to balance the accounts. The following transactions were later discovered:
i) Interest paid of GH¢5,000 and Interest received of GH¢8,000 have both been entered on the wrong side of the trial balance.
ii) The receivable control account balance of GH¢224,387 had been included in the trial balance as GH¢242,387.
iii) Sales of GH¢2,000 had been omitted from the sales records (i.e., from the sales day book).
iv) Purchase of raw material of GH¢4,005 was entered in the purchase account as GH¢4,500.
v) The balance on the current account with the Proprietor’s wife had been omitted from the trial balance. This item when corrected will clear the suspense account.

Required:
Open a suspense account and correct the above transactions in it. (6 marks)

c) ABC Ltd has prepared its October 2018 bank reconciliation for auditors to review. As at 31 October 2018 the ledger balance was GH¢2,450 (Credit) but the bank statement showed that the company has funds amounting to GH¢3,743.

The following are useful information:

The company arranged for the bank to transfer the dollar equivalent of GH¢500,000 to a supplier in the United States. Charges on the transfer of 0.5% have not been recorded in the books of ABC Ltd.
The CEO of ABC Ltd arranged for an amount of GH¢3,000 to be transferred from his personal bank account into the company’s account. The bank made the transfer on 31 October 2018, but ABC Ltd has not made any entry in its books.
A Cheque for Electricity Company amounting to GH¢5,600 issued and recorded correctly in the bank statements appeared in ABC ledger as GH¢6,500.
The following cheques issued by ABC Ltd in October 2018 did not appear on the bank statement:
Cheque # 00450 – GH¢2,000
Cheque # 00456 – GH¢4,800
Cheque # 00500 – GH¢5,250
Three cheques received and booked by ABC Ltd amounting to GH¢4,800 were not credited by the bank.
Income earned on investment with an advice by the bank of GH¢2,457 was not recorded by the bank until 3 November 2018.

Required:
i) Prepare the bank account in ABC Ltd nominal ledger including any adjusting entries based on the information above. (5 marks)
ii) Prepare a reconciliation of the bank statement balance to the corrected balance on the bank account in ABC Ltd nominal ledger. (5 marks)

Answer

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Tags: Bank Reconciliation, Errors in accounting, Suspense account
Level: Level 1

Topic: Bank reconciliations, Correction of errors
Series: NOV 2018

FA – May 2018 – L1 – Q3 – Bank reconciliations | Correction of errors

Identify errors not affecting the suspense account and prepare a bank reconciliation statement.

Question

a) When there is a difference in a trial balance, a suspense account is opened with the amount of the difference so that the trial balance agrees (pending the discovery and correction of the errors causing the difference). This is the only time an entry is made in the records without a corresponding entry elsewhere. Not all types of errors affect the balancing of the records and the suspense account.

Required:
Identify and explain THREE errors that do not affect the suspense account. (6 marks)

b) The Bank Account in the books of Akwatia Ltd for the month of October 2017 was as follows:

The following is the bank statement for Akwatia Ltd for the month of October 2017

The bank has confirmed to Akwatia Ltd that it made errors in Akwatia’s bank account on 6 October 2017 and 21 October 2017 amounting to GH¢950 and GH¢600, respectively.

Required:
Prepare the bank reconciliation statement for Akwatia Ltd as at 31 October 2017. (14 marks)

Answer

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Tags: Bank Reconciliation, Errors in accounting, Suspense account
Level: Level 1

Topic: Bank reconciliations, Correction of errors
Series: MAY 2018

FA – May 2017 – L1 – Q3 – Bank reconciliations | Preparation of financial statements of a sole trader

Preparation of adjusted cash book, bank reconciliation, and corrected net profit statement for Unity Trading Enterprise.

Question

The Income Statement of Unity Trading Enterprise (UTE) for the year ended 31 December 2016 as prepared by an Accounts Assistant indicated a net profit of GH¢49,360,000. However, the cash book on 31 December 2016 showed a balance at bank to be GH¢6,440,000. Your attention is however drawn to the following:

i) Cheques from customers totaling GH¢4,980,000 which were recorded in the cash book on 20 December 2016 were actually not credited by the bank until 2 January 2017.

ii) Cheques issued on 13 December 2016 totaling GH¢7,420,000 in favour of suppliers were actually not paid by the bank until after the end of the year (that is after 31 December 2016).

iii) On 22 November 2016, the bank paid an amount of GH¢3,600,000 with respect to a standing order from UTE for rent of business premises for the three months to 31 January 2017 but unfortunately, no entry for this payment had been made in the cash book. Additionally, no provision of this outstanding rent had been made in the income statement for the period.

iv) On 31 December 2016, a customer known as Mr. Abuusu had paid GH¢2,340,000 into UTE bank account through a standing order to his bankers in full settlement of a debit balance of GH¢2,400,000 in UTE sale ledger, but no entry had been made in the books.

v) On 30 December 2016, a cheque for GH¢480,000 was received from a customer in settlement of sales invoice for the same amount. The cheques were lodged into UTE bank account. Both sale of goods and the cheque were entered in UTE’s books. However, on 31 December 2016, the customer returned the goods and also instructed her bankers not to pay the cheque (This instruction was carried out the same day) but no entries in respect of these latter developments have been made in UTE’s books. The cost of these goods amounting to GH¢320,000 were not actually included in the closing inventories.

vi) A cheque for GH¢840,000 from an insurance company in settlement of claim for fire damage to inventory had been paid into the bank and credited by the bank on 21 December 2016, but an estimated amount of GH¢800,000 had been entered in UTE’s income statement.

Required:
a) Prepare a statement on 31 December 2016, indicating clearly the cash book balance. (5 marks)

b) Prepare the bank reconciliation statement for UTE. (5 marks)

c) Prepare a statement of corrected net profit of UTE on 31 December 2016. (5 marks)

d) Explain TWO reasons for carrying out bank reconciliation. (2 marks)

e) Explain why the bank statement is usually taken as being more accurate than the details that appear in the company’s own records. (2 marks)

f) Indicate how the bank balance will be reported in UTE’s final accounts. (1 mark)

Answer

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

Topic: Bank reconciliations, Preparation of financial statements of a sole trader
Series: MAY 2017

FA – May 2016 – L1 – Q3 – Bank reconciliations

Prepare an adjusted cash book, a bank reconciliation statement, and discuss the benefits of reconciling cash book and bank statement balances.

Question

The following is a summary from the cash book of BW Ltd for July 2015:

Description	GH¢
Opening balance	1,530
Receipts	23,104
Payments	(23,005)
Closing balance	1,629

On investigation, it was discovered that:
i) Bank charges of GH¢15 shown on the bank statement have not been entered in the cash book.
ii) A cheque drawn for GH¢110 to pay a supplier has been entered in the cash book as a receipt.
iii) A cheque from a customer for GH¢120, which was banked (and included above in receipts), has been returned by the bank, but this has not been adjusted in the company’s books.
iv) An error of transposition which occurred in the opening balance of the cash book should have been recorded as GH¢1,350.
v) Cheques totaling GH¢264 have been sent by post to suppliers but were not presented to the company’s bank until August 2015.
vi) The last page of a bank account paying-in book shows a deposit of GH¢1,040 which was not credited to the account by the bank until 1st August 2015.
vii) The company’s bank statement at 31st July 2015 shows a balance of GH¢318.

Required:
a) Demonstrate any adjustments needed to the company’s accounting records. (8 marks)
b) Prepare a Bank Reconciliation Statement as at 31st July 2015. (6 marks)
c) Explain THREE benefits to BW Ltd of reconciling its cash book and bank statement balances. (6 marks)

Answer

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

Topic: Bank reconciliations
Series: MAY 2016

FA – Nov 2015 – L1 – Q1 – Bank reconciliations

Discuss depreciation, useful life of fixed assets, factors causing depreciation, and prepare various accounts including adjusted cash book and bank reconciliation statement.

Question

(a) Explain the following Terms:
i. Depreciation.
ii. Useful Life of a Fixed Assets. (4 marks)

(b) There are four (4) factors/causes that contribute to depreciation of a Fixed Asset. List these factors or causes. (2 marks)

(c) Atta Moses is a trader who prepares account to 31st December each year. The following transactions with regard to Assets have taken place:
i. 3rd January, 2010 purchased one Office Equipment (Laptop) for GH¢2,000.
ii. 5th July, 2011 purchased Plant and Machinery costing GH¢50,000.
iii. 1st December, 2011 purchased Plant and Machinery for GH¢20,000
iv. 15th December, 2012 bought Office Equipment (Printer) for GH¢1,000.

Mr. Atta maintains its Fixed Assets at cost and depreciates its Asset at a constant rate of 20% using the straight-line method of providing for depreciation for all Assets. Assets purchased attract full depreciation charge in the year of purchase, whilst any asset disposed of attracts no depreciation charge.

You are required to prepare the following:
i. Plant and machinery Account.
ii. Office Equipment Account.
iii. Provision for Depreciation Account. (6 marks)

(d) The following information was extracted from the records of Mama Constance, a Petty Trader as at 31st December, 2014. Balance as per Bank Statement as at 31st December, 2014 was GH¢10,000 credit. Cash Book balance was GH¢40,000 credit in the Bank Account column. The following had been reflected in the Bank Statement but not in the Cash Book:
i. Bank loan interest GH¢ 2,000
ii. Bank Charges GH¢ 6,000
iii. Dividends from Investment GH¢ 10,000
iv. Interest from Treasury Bill GH¢ 4,000

In addition, a cheque of GH¢ 20,000 issued to Madam Peace was dishonoured because of insufficient funds. A cheque of GH¢25,000 from Stephen has not been credited. A cheque of GH¢49,000 issued to Samuel remained unpresented.

You are required to prepare:
i. An adjusted Cash Book. (2 marks)
ii. Bank Reconciliation Statement as at 31st December, 2014. (6 marks)

Answer

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Tags: Accounting Transactions, Bank Reconciliation, Depreciation, Fixed Assets
Level: Level 1