Question

The following information relates to the June 2018 cash transactions for Allmar Pty Ltd.

1. The following unpresented cheques (outstanding cheques) appeared on the 31^st May 2018 bank reconciliation:

Cheque no.	Amount ($)
6539	1,207.60
6548	3,605.00
6549	317.40
6555	575.60
6558	990.00

2. All cheques except for cheque no. 6558 are included in the 30^th June 2018 bank statement. On 31^st May 2018, a deposit of $5,163.00 was outstanding.
3. In the company’s records the cash balance at 31^st May 2018 was $39,659.56 debit.
4. Total cash payments of $99,565.60 were credited to cash at bank for the month of June 2018.
5. Total cash receipts for June were $104,291.40, but $3,964.90 of these were received on 30^th June are outstanding as they have not yet been credited by the bank.
6. The bank statement at 30^th June 2018 shows a closing credit balance of $53,852.26.
7. The following information only appeared on the bank statement in June, service charges of $64.80; a $190.80 returned cheque due to insufficient funds in the drawer’s account; and the 31^st May deposit of $5,163.00 which was credited by the bank on 1^st June.
8. Cheque no. 6585, written for telephone expenses on 20^th June, and recorded by the company at $1,978.00, was correctly paid by the bank as $1,996.00
9. The June bank statement shows a debit of $1,165.00 for a cheque which was not written by Allmar Pty Ltd, but which was incorrectly debited to their account by the bank.
10. The following cheques are included in the company’s records but do not appear on the company’s bank statement for June:

Cheque no.	Amount ($)
6598	574.80
6599	5,137.40
6614	4,181.20
6615	3,987.00

Required:

1. Prepare the cash bank account in the general ledger as a result of the adjustments required to balance the account to the bank statement for the month of June 2018.
2. Prepare the bank reconciliation as at 30^th June 2018.
3. Explain how a dishonoured cheque would be treated by Allmar’s bank and why it is treated this way

Answer 1

Cash bank account:

Dr Cr

Date	Particulars	Bank ($)	Date	Particulars	Bank ($)
June 1, 2018	Opening balance	$39,659.56		By payments	$99,565.60
	To receipts	$104,291.40	June 31, 2018	By Service charges	$64.80
			June 31, 2018	By dishonoured cheque	$190.80
			June 31, 2018	By short payment for telephone expenses [$1996-$1978]	$18
			June 31, 2018	By Closing balance (bal.fig.)	$44111.76
		$143950.96			$143950.96

Bank Reconciliation Statement:

Allmar Pty Ltd.
Bank Reconciliation Statement
For the month June, 2018
Balance as per bank statement		$53,852.26	Balance as per books (adjusted balance)		$44111.76
Add:
Wrong debit by bank	$1,165
Deposit in transit	$3,964.90
		$5129.9
Deduct:
Outstanding cheques-
6558	$990
6598	$574.80
6599	$5,137.40
6614	$4,181.20
6615	$3,987.00
		($14870.4)
Adjusted bank balance		$44111.76	Adjusted book balance		$44111.76

Treatment of returned cheque :

When a cheque is deposited by the client into the bank, the bank credits client's account. But when the same cheque is returned due to insufficient funds in drawer's account the bank debits client account. So the Allmar's bank account debits All Mar bank account i.e. reduces the bank balance.