Topic: Bank reconciliations

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  • 1 Marks

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

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

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:
D. An overdraft of N50,000

Explanation:
A credit balance in the bank column of the cash book signifies that the business has an overdraft. This means that the business has spent more money than is available in the bank account, resulting in a negative or overdraft balance. The bank account is overdrawn by N50,000.
  • 1 Marks

FA – May 2016 – L1 – SA – Q2 – Bank Reconciliation

A question regarding cashbook adjustments during the preparation of a bank reconciliation statement.

During the preparation of a bank reconciliation statement, some transactions were discovered to have caused the difference between the cashbook balance and the bank statement balance. Which of the following will be required for cashbook adjustment?
A. Uncredited lodgement
B. Cheque paid in by the company but dishonoured
C. Amount incorrectly debited by the bank to the account
D. Amount incorrectly credited by the bank to the account
E. Cheque issued to Mr. Mohammed by the company but not yet presented in the bank

Answer:

B. Cheque paid in by the company but dishonoured

Explanation:
A dishonoured cheque that was deposited into the company’s account but later rejected by the bank must be adjusted in the cashbook to reflect the correct balance. This adjustment ensures the cashbook is accurate, as the initial entry of the cheque would have increased the cashbook balance incorrectly.
  • 1 Marks

FA – May 2024 – L1 – SA – Q16 – Bank Reconciliation

Identifies the primary purpose of performing bank reconciliations in accounting.

The primary purpose of performing bank reconciliations in accounting is to:

A. Ensure that the balance in the cash at bank account and the balance shown in the bank statement are always the same
B. Identify and correct errors in accounting records related to cash transactions with the bank
C. Combine the cash book balance with the bank statement balance to get the total cash position
D. Reconcile the balances of other accounts in the general ledger with the bank statement
E. Verify the accuracy of non-cash transactions in the accounting records

Answer: B

Explanation: The correct answer is B. The primary purpose of bank reconciliation is to identify and correct discrepancies between the cash balance shown in a company’s accounting records and the balance shown on the bank statement. This process helps detect errors, unrecorded transactions, or potential fraud.

  • 1 Marks

FA – MAY 2015 – L1 – SA – Q19 – Bank Reconciliations

Calculate the bank statement balance from the adjusted cash book balance.

Question:
The balance as per bank statement is:
A. N39,500
B. N41,500
C. N139,500
D. N179,500
E. N239,500

Answer: A
Explanation:
From the adjusted cash book balance of N109,500, subtract uncredited cheques of N70,000.
Bank statement balance = N109,500 – N70,000 = N39,500

  • 1 Marks

FA – MAY 2015 – L1 – SA – Q18 – Bank Reconciliations

Calculate the adjusted cash book balance from given data.

Use the following information to answer questions 18 and 19:
Balance as per cash book: N220,000
Dishonored cheques: N100,000
Bank charges: N10,500
Uncredited cheques: N70,000

The adjusted cash book balance is:
A. N100,000
B. N109,500
C. N155,500
D. N209,500
E. N309,500

Answer: B
Explanation:
To adjust the cash book balance:
Start with the cash book balance of N220,000
Subtract dishonored cheques of N100,000
Subtract bank charges of N10,500
Adjusted cash book balance = N220,000 – N100,000 – N10,500 = N109,500

  • 6 Marks

FA – Mar 2024 – L1 – Q3b – Bank reconciliations

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

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:

  1. Total purchases were recorded at GH¢80 below their correct value, although the total value of trade payables was correctly recorded.
  2. Total telephone expenses were recorded at GH¢800 above their correct amount, although the total value of the amounts payable was correctly recorded.
  3. 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.
  4. Equipment costing GH¢1,600 had been recorded as a debit entry in the repairs and maintenance account.
  5. 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.
  6. 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)

b) Abeiku Limited Journal Entries:

  • 14 Marks

FA – Mar 2024 – L1 – Q3a – Bank reconciliations

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

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:

  1. 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.
  2. Bank charges of GH¢850 have not been entered in the cash book.
  3. 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.
  4. A standing order for payment of an annual subscription amounting to GH¢500 has not been entered in the cash book.
  5. 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.
  6. 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.
  7. 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.
  8. 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)

a) Malik & Company
Bank Reconciliation Statement as at 31 December, 2023

  • 14 Marks

FA – Nov 2023 – L1 – Q3b – Bank reconciliations

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

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:

  1. The bank has credited the account in error with GHȼ485, which belongs to another customer.
  2. A cheque drawn, amounting to GHȼ345, has been entered in the cashbook as GHȼ354.
  3. Bank charges of GHȼ320 on the bank statement have not been entered in the cashbook.
  4. Cheques totalling GHȼ664 have been correctly entered on the debit side of the cashbook but have not been paid in at the bank.
  5. 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.
  6. 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
  1. 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)

i) Adjusted Cashbook

  • 6 Marks

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.

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)

i) Reasons for carrying out a bank reconciliation:

  1. To confirm the accuracy of entries in the cash book:
    A bank reconciliation helps to ensure that all transactions recorded in the cash book are accurate and complete. Any discrepancies between the cash book and the bank statement can be identified and corrected.
  2. To uncover any error which may have been made by the bank:
    Sometimes banks may make errors in recording transactions. A bank reconciliation allows these errors to be identified, enabling the business to notify the bank for correction.
  3. To provide a reliable cash figure for the trial balance:
    By reconciling the bank balance, businesses can ensure that the cash figure reported in the trial balance is accurate and reliable, reflecting the actual cash available.

ii) Items appearing in the bank reconciliation:

  1. Unpresented cheques:
    These are cheques that have been issued by the business but have not yet been presented to the bank for payment. They appear in the cash book but not yet in the bank statement.
  2. Outstanding lodgements:
    These are deposits that have been made by the business but have not yet been credited by the bank. They appear in the cash book but not yet in the bank statement.
  3. Bank errors:
    Errors made by the bank, such as incorrect debits or credits, can appear in the bank reconciliation. These need to be identified so that the bank can be informed and the errors corrected.

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