Question

Ah Jie is owner of Jie Kopitiam. At the end of each month, Ah Jie prepares a bank reconciliation statement for her business bank account. At 31 May 2019 her ledger balance was RM2,759 (credit) and her bank statement showed that she had funds of RM131 at the bank.
She has the following information:
(i) Jie has arranged for RM2,500 to be transferred from her personal bank account into the business bank account. The bank made the transfer on 30 May, but Jie has not made any entry for it in her records.
(ii) On 21 May, Jie withdrew RM100 cash which she did not record.
(iii) Cheque number 202003, which Jie issued to a supplier, appears on the bank statement as RM650. Jie incorrectly recorded the cheque as RM560.
(iv) The bank debited Jie’s account with charges of RM129 during May. Jie has not recorded these charges.
(v) On 31 May, Jie lodged RM457. On the bank statement, this amount is dated 3 January 2020.
(vi) Jie was advised by the bank that she earned RM52 interest for the period in May that her account was in credit. Jie recorded this in May, but the bank did not credit her account until January 2020.
(vii) Three of the cheques issued in May, with a total value of RM942, were not debited on the bank statement until after 31 May.
(viii) A cheque for RM276, issued to a supplier, was cancelled but Jie has not recorded the cancellation of the cheque.

Required:
(a) Show the bank account in Jie’s general ledger, including any adjusting entries required due to the information given in points (i) to (viii). Note: You MUST present your answer in a format which clearly indicates whether each entry is a debit or a credit. [14 marks]
(b) Prepare a reconciliation of the bank statement balance to the corrected balance on the bank account in Jie’s general ledger. [3 marks]
(c) Indicate how the bank balance will be reported in Jie’s final accounts and the value to be reported. [3 marks]

Answer 1

1. GENERAL LEDGER OF BANK ACCOUNT IN BOOKS AND ALSO ADJUSTING JOURNAL ENTRIES

AMOUNT IN RM

Bank Account
Dr.		Cr.
Description	Amount	Description	Amount
Proprietor's Capital	2500	Opening Balance (May 31)	2759
Accounts Payable	276	Cash	100
		Accounts Payable	90
Closing Balance	302	Bank Charges	129
	3078		3078

AMOUNT IN RM

Date	Description	Debit	Credit
21-May	Cash	100
	Bank		100
	(Withdrwal from Bank)
30-May	Bank	2,500
	Proprietor's Capital		2,500
	(Transfer from Personal Bank Account to Business Bank Account)
31-May	Bank Charges	129
	Bank		129
	(Bank Charges for the month of May)
	Accounts Payable	90
	Bank		90
	(Incorrect amount recorded now corrected)
	Bank	276
	Accounts Payable		276
	(Reversal of Entry due to Cheque Cancellation)

2. BANK RECONCILIATION STATEMENT

AMOUNT IN RM

Bank Reconciliation Statement
As on May 31,2019
Description	Debit	Credit
Bank Overdraft as per Books of Accounts (Cr.)		302
Amount Lodged		457
Interest Earned but not credited by Bank		52
Cheques issued but not debited in Bank	942
	942	811
Balance as per Bank Account (Cr.)		131

3. The Bank Balance will be Reported as

AMOUNT IN RM

Balance Sheet
Current Liabilities:
Bank Overdraft	302

WORKING NOTE:

Bank Overdraft is always prepared for those transaction for which no adjustments can be done in Books of Account and our under the control of Bank. Therefore, firstly all adjustments in Books of Account will be done and thereafter the Bank Reconciliation is prepared for the Correct Balance which is RM 302 (Cr.)