Question

1. The firm’s Cash Book showed a Dr. balance of S$7,522 on 31st January 2004. The Bank statement showed a different balance. The following differences were discovered.

1. A cheque of S$364 issued to a creditor was not reflected in the bank statement.
2. Cheques totalling S$147 deposited on 30th January were not credited.
3. Bank paid S$240 to insurance company per standing order.

4. Bank charges, S$86.

5. A cheque of S$132 from K Sly deposited on 27th January was returned unpaid. This was not recorded in the Cash Book.

Questions(Explanation required):

1.Update the Cash Book
2.Prepare a Bank Reconciliation Statement as at 31st January 2004

Answer 1

journal to record bank charges and insurance paid

Particular	Debit	Credit
Insurance expense (Dr.)	240
bank (Cr.)		240
(to record insurance paid)

Particular	Debit	Credit
Bank charges (Dr.)	86
Bank (Cr.)		86
(to record bank charges paid)

1. as cheque issued to creditor was not reflected in bank statement that means the cash book is understated by 364 hence we will add 364 to the amount.

2. cheque deposited were not credited hence the cash book is overstated by 147 and must be reduced from the cash book.

3. bank paid insurance hence the amount is not deducted from cash book hence cash book is overstated by 240. Hence the amount is to be reduced from cash book.

4. bank charges paid is not deducted from cash book hence cash book is overstated by 86. Hence the amount must be reduced from cash book.

5. check deposited returned unpaid. Hence the cashbook is overstated by 132. Hence the amount must be deducted from cash book.

Particular	Amount	Amount
Balance as per cash book		7522
add cheque issued to creditor not reflected in Bank statement	364	364
less charges and unpaid cheques
less cheque deposited not credited in bank	147
less insurance paid by bank	240
less bank charges paid	86
less unpaid cheque	132	(605)
balance as per cash book		7281