BANK RECONCILIATION STATEMENT

Introduction
You have now learnt how to balance the cashbook and to fnd the balance of
the bank account. In this chapter we look at the way in which a business
deals with any diferences between the balance of the bank account in the
cashbook and the closing balance of
the bank account shown by the bank statement for the same period. These
diferences are explained by a document known as bank reconciliation
statement. The bank reconciliation statement lists the items which are in the
cashbook but not on the bank statement and, items which are on the bank
statement but not in the cashbook. This process enables the business to
update its cashbook and also helps to prove the accuracy of the bookkeeping
of the business and the bank.
Objectives
By the end of this topic you shoud be !be to"
i# Co$p!re tr!ns!ctions th!t !ppe!r on both c!sh boo% !nd
b!n% st!te$ent
ii# Identify c!uses of di&erence bet'een c!shboo% !nd b!n%
st!te$ent b!!nce
iii# (pd!te c!sh boo% fro$ det!is of tr!ns!ctions !ppe!rin) on
b!n% st!te$ent
iv# Identify unpresented !nd uncredited che*ue
v# C!cu!te b!!nce !s per b!n% st!te$ent
vi# +rep!re ! b!n% reconcii!tion st!te$ent
KE, TERMS
B!n% reconcii!tion st!te$ent" statement prepared to link the bank
balance shown in the cashbook with the balance shown on the bank
statement.
Ti$in) di&erences" !iferences between the bank statement and the cash
book that will be
corrected over time, such as unpresented che"ues and outstanding
lodgments.
(ncredited Che*ues" mounts that have been paid into the bank, but not
yet recorded on the bank statement.
(npresented che*ues" #he"ues that have been issued but have not yet
been paid in and deducted from the account of the business
+urpose of b!n% reconcii!tion
$ne tool of maintaining proper record discipline is to ensure that all receipts
are banked into the bank account intact. %anks sends to their customers a
record of the transactions made through that account in the form of a bank
statement. It shows money lodged into the accounts &described in the bank
statement as credits' and money paid out &described in the bank statement
as debits'. The business records bank transactions in the cashbook, bank
column. It is possible that some of the entries in the cashbook difer from
those of the bank due to time lag in receipt of information or due to errors.
$ften, when a comparison is made between the bank balances as shown in
the frm(s cashbook with that shown on the bank statement, the two balances
will be diferent. It is for this reason that a bank reconciliation statement is
prepared to reconcile &)tally up(' the two balances. The reconciliation may
1
identify errors that may have been made in either the frm(s cashbook or in
the bank(s records.
bank statement is a copy of business bank account transactions as
recorded by the bank.
%ank statements are regularly sent out to customers usually on monthly
basis. This enables the customer to check their funds in the bank regularly
and to update their records accordingly. %ank reconciliation between the
cashbook balance and the bank statement balance simply means an
explanation of the diferences, which takes the form of a written calculation.
CA(SES O- .I--ERENCES BET/EEN CAS0 AN. BANK BALANCE
The diference between the cashbook and the bank statement balance results
from two factors*
i' Timing diference in recording of transactions.
ii' +rrors made by either the business or by the bank in recording
transactions.
Timing Diferences
These are diferences caused by time lag in the receipt of information or
recording of a transaction between the bank and the business. +xamples
include*
i) Unpresented cheques
,npresented che"ues are che"ues paid out by the business but the recipients
have not presented them to the bank for payment. -or instance the business.
paying cashier may send che"ues out to suppliers, some of whom may pay in
the che"ue at the bank immediately while others may keep the che"ue for
several days before paying it in. /hen this happens the cashier will have
recorded all the payments in the cashbook. 0owever, the bank records will
only show the che"ues that have actually been paid in by the suppliers and
deducted from the business bank account. #he"ues, for some reason may
not be presented to the bank for payment. /hile the unpresented che"ues
appear as a payment in the cashbook they would not appear in the bank
statement
ii) Uncredited cheques
,ncredited che"ues are che"ues received by the business but not credited
into the bank account. -or instance the frm1s records a receipt in the
cashbook from the bank paying.in slip. 0owever, the bank may not record the
receipt for a day or so, particularly if it is paid in late in the day, or if it is paid
in at a bank branch other than the one at which the account is maintained.
iii) Direct Credits
nother timing diference may occur when the bank has received a direct
payment for the business. In this instance the bank will have recorded the
receipt in the business(s account at the bank but the business will be
unaware of the payment and will therefore not have recorded the receipt in
the cashbook. +xamples include*
a' 2tanding order for incoming payments received on the business
account, e.g. payments from debtors &customers' when the payment
has not been advised to the business
b' Interest and refunds credited by the bank
iv) Bank charges
2
These are fees charged by the bank for maintaining the account and for
executing transaction, they include ledger fees, commission and other
levies. The business would not know the charges until they receive the
bank statement. 2uch charges will appear in the bank statement but not
the cashbook.
v) Payment standing order
3ayment standing orders are instructions to the bank to execute payment
on behalf of the business. 4ormally periodic payments like insurance are
best executed by way of standing order. The business would not know
about the execution of the payment until the receipt of bank statement.
The standing order will appear in the bank statement but not cashbook.
vi) Unpaid cheques
These are the che"ues paid to or out of the business account but which
are either stopped by the drawer or are returned as dishonored &bounced'.
Diferences caused by Error
The diference between the cashbook and bank balances may be caused by
error on the part of the bank or in the cashbook entries. -re"uent bank
reconciliation is advisable so as to identify and rectify errors as soon as
possible. It is good business practice to prepare a bank reconciliation
statement each time a bank statement is received. This will ensure that any
"ueries either with the bank statement or in the frm(s cashbook can be
resolved.
BANK RECONCILIATION +ROCESS
/hen a bank statement has been received, any errors and "ueries are frst
identifed and dealt with before the reconciliation. $nce all errors are
corrected then the reconciliation of the diference between the cashbook
balance and the bank balance is carried out as follows*
Step 1 Identify the diferences by ticking of the items that appear in both
the cash
book and the bank statement.
Step 2 The unticked items on the bank statement include the bank
charges, direct credits and payment standing orders. These are
entered into the bank columns of the cashbook to bring it up to date. In
other words the cashbook balance is ad5usted to re6ect these items.
Step 3 The unticked items from the cashbook are the result of timing
diferences and are used to prepare the bank reconciliation statement
as shown below.
C!sh boo% !djust$ents
%alance as per cashbook xxx
%ank charges &xxx'
2tanding order &xx'
!irect credits xxx
d5usted cash book balance xxx
B!n% reconcii!tion st!te$ent !s !t45d!te#
d5usted cash book balalance xxx
dd unpresented che"ues xx
7ess uncredited che"ue &xx'
3
%alance as per bank statement xxx
E6AM+LE 1
The balance in the cashbook of 8r. #huma as at 9:;:<;=9 was sh. 9=,===. $n
the same date the balance as per the bank statement was sh. >=,=== &credit'.
$n examining the bank statement and the cash book the following diference
were observed.
:. #he"ue totalling sh. ?,=== had been paid into the bank on 9:;:<;=9
but were not credited by the bank until :;:;=@
<. %ank charges amount to Ash. B==
9. standing order to A37# of sh. ?== had been paid by the bank but not
entered in the cashbook.
@. Interest income amounting sh. :9,=== collected by the bank did not
appear in the cash bank.
>. mounts paid to suppliers but not presented for payment to the bank
amount to ksh. :B,@==.
Required
a !d"usted cash book ba#ance
b Bank reconci#iation statement
Su))ested Soution
C!sh boo% !djust$ents
%alance as per cash book 9=,===
%ank charges &B=='
2tanding order &?=='
!irect credits :9,===
d5usted cash book balance @:,B==
Mr7 Chu$!
B!n% reconcii!tion st!te$ent !s !t 31812893
d5usted cash book balance @:,B==
dd unpresented che"ues :B,@==
7ess uncredited che"ues &?,==='
%alance as per %ank 2tatement >=,===
B!n% Overdr!fts
%usinesses may overdraw their bank account. n overdraft is a negative bank
balance. It is a situation where the business has borrowed from the bank on
its current account. This is shown* in the cash book as a credit balance
brought &or carried' forward &or down' while on the bank statement where the
balance is followed by )!C( &or sometimes by )$!(' D which means that there
is an overdraft. The bank reconciliation process is the same as that stated
above except that it starts with a negative cash balance.
E6AM+LE 2
The balance in the cashbook of 8r. A. A as at 9:;:;=@ was shs. :=,===
&credit'. $n the same date the balance as per the bank statement was
shs.9=, ===
4
$n examining the bank statement and the cashbook the following diference
were observedE
:. #he"ues totalling sh. :<,=== had been paid into the bank on 9:;:;=@
but were not credited by the bank until :;<;=@
<. %ank charges amount to Ash. :,>==
9. standing order to A37# of Ash. <,<== had been paid by the bank but
not entered in the cashbook.
@. !ividend income amount Ash.::,=== collected by the bank did not
appear in the cashbook.
>. #he"ues totalling sh. @@,F== had been paid to suppliers but not
presented to the bank.
Required
a !d"usted cashbook ba#ance
b Bank reconci#iation statement
C!shboo% 5!djusted#
%alance as per cashbook &:=,==='
%ank charges &:,>=='
2tanding order &<,<=='
!irect credit ::,===
d5usted cashbook balance &<,F=='
Mr7 K7 K
B!n% reconcii!tion st!te$ent !s !t 318189:
d5usted cashbook balance &<,F=='
dd unpresented che"ue @@,F==
7ess uncredited che"ues &:<,==='
%alance as per bank statement 9=,===
E6AM+LE 3
The cash book bank column of G.G for the month !ecember <==9 is as follows*
!ate #he"ue
. 4o
!etails mount !ate #he"ue
4o.
!etails mount
<;:<
:=;:<
:?;:<
<<;:<
9:;:<
=:>
::B
:<>
:F9
Ainyua
Guma
$kumu
8usa
%al c;f
:<,===
:@,===
:?,===
:<,===
F,===
B9,===
:;:<
>;:<
:<;:<
<=;:<
<=;:<
B>:
B><
B>9
B>@
%al b;f
Gogoo
2imba
4yuki
4yati
:=,===
:>,===
:B,===
:=,===
:<,===
B9,===
The bank provided the following bank statement as at 9:;:<;=9
!ate #he"u
e
!etails !ebit #redit %alance
:;:<
<;:<
>;:<
:=;:<
::;:<
:<;:<
=:>
B>:
::B
B><
%al b;f
7edger fees
:=,===
:>,===
<,===
:B,===
:<,===
:@,===
&:=,==='
<,===
&:9,==='
&:F,==='
5
:?;:<
:H;:<
<<;<
9:;:<
Interest income
#ommission
0eritage
Insurance
%alance
:,===
9,===
9,=== &:@,==='
&:>,==='
&:?,==='
&:?,==='
Required
a !d"usted cash book
b Bank reconci#iation statement as at $%&%'&($
Su))ested soution
Adjusted c!sh boo%
%alance as per cash book &F,==='
%ank charges &9,==='
2tanding order &9,==='
!irect credit 9,===
%alance as per ad5usted cash book :=,===
;;
B!n% reconcii!tion st!te$ent !s !t 31812893
d5usted cashbook balance &:=,==='
dd unpresented che"ue <<,===
7ess uncredited che"ue &9=,==='
%alance as per bank statement &:?,==='
/orkings
%ank charges I ledger fees J commission
I <,=== J :,=== I sh. 9,===
,npresented I che"ue no. B>9 K B>@
I :=,=== J :<,=== I <<,===
,ncredited I che"ue no :<> K :F9
I :?,=== J :<,=== I sh 9=,===
.ishonoured che*ues
business may receive che"ues which eventually are not honoured by the
bank. It is good to note that a che"ue is an instruction by a person to his or
her bank to pay another person from the bank account. The bank may fail to
honour the instructions if for some reason the instructions are defective or if
there is no money in the account. The person paying may also intercept the
che"ue before it clears. The dishonored che"ues or cancelled che"ues should
be corrected together with any errors before the reconciliation. The cashbook
balance is ad5usted to remove the efects of the dishonored che"ues.
6
E<!$pe :
You have 5ust been employed by -arma#hemu 7imited as a trainee
accountant. Your frst exercise is to check the transactions in the
company(s cashbook, check the entries on receipt of the bank
statement, update the cashbook and make any amendments as
necessary after which you will prepare a bank reconciliation statement
at the end of the month. The company1s cashbook and the bank
statement for the month of !ecember <==@ are provided.
-arma#hemu 7td . #ash %ook
#20 %$$A
C+#+I3T2 3Y8+4T2
!ate !etails %ank !ate !etails %ank
<==@
Ash
)===(
<9@@
Ash
)===(
: !ec. %alance bId :,H@B <!ec.
4yumbani
housing
F>
: !ec. I Cegi K #o <@H <!ec. 0adish <9@:== 206
>!ec. % ,kusu :?? @!ec.
Cose 6ower
7td
234101 9:>
?!ec. + 7isha :>= F !ec. 8uta Larage 234102 <::
:= !ec. 8anduong 7td @@= H!ec.
8awe 0.
-inance
:<=
:? !ec. 2im2im 7td B> :9 !ec. 0udi bili 234103 <<
<F !ec. 8ato ><= <= !ec. shante 7td 234104 :9F
9= !ec.
!audi K
3artners
?< <F !ec. Cates <9@:=> <F=
9: !ec. %alance cld <,<?@
3,640 3,640
9: !ec.
%alance bId <,<?@
%ibilioni %ank 2TT+8+4T
8arket %ranch
ccount -arma#hemu 7imited ccount no. F?9==>?<
!ate 9: !ecember <9@@
2tatement 4o.
:B
!ate !etails !ebit #redit %alance
<==@ )===( )===( )===(
: !ec. %alance :,H@B #C
<!ec. #he"ues <@H <,:H> #C
@!ec.
4yumbani housing
Insurance
F> <,:<= #C
7
@!ec. <9@:=: 9:> :,?=> #C
>!ec. % ,kusu :?? :,HH9 #C
?!ec. #he"ues :>= <,:@9 #C
H!ec. <9@:=< <:: :,H9< #C
:< !ec. #he"ues @@= <,9F< #C
:< !ec. 8awe 0. -inance :<= <,<>< #C
<= !ec. #he"ues B> <,9:F #C
<F !ec. Cates <F= <,=@F #C
9= !ec. Turana and %ros H< <,:9H #C
9: !ec. %ank #harges >> <,=?@ #C
9: !ec. -amily -inance #o. :,=== :,=?@ #C
Required) Bank reconci#iation statement
S(==ESTE. SOL(TION
Adjusted c!sh boo%
Ash )===(
%alance as per cash book <,<?@
%ank charges >>
2tanding order :,=== &:,=>>'
!irect credit H<
%alance as per ad5usted cash book :,9<:
-!r$!Che$u Ltd
B!n% reconcii!tion st!te$ent !s !t 31812893
Ash )===(
d5usted cashbook balance :,9<:
dd unpresented che"ue 9B>
7ess uncredited che"ue &B=<'
%alance as per bank statement :,=?@
/or%in)s
,npresented che"ue
Ash )===(
<9@:== <=B
<9@:=9 <<
<9@:=@ :9F
9B>
,ncredited #he"ues ><= J ?< I B=<
8
E<!$in!tion *uestions
>uestion one
&a' !iferentiate between a petty cash.book and a three D column cash.book
&> marks'
&b' %rie6y explain why it is important for a business entity to prepare a bank
reconciliation statement. 53
$!r%s#
&c' You have recently been employed in a medium siMe company and
deployed in the accounts department. Your head of section has given you
the following extract from the cash.book for the month of pril <==9*
Sh7 Sh7
Ceceipts during the month <,H9?,=== %alance brought forward
&:.@.<==9' :,><<,===
%alance carried forward
&9=;@;=9' :,:=?,=== 3ayments during the month
<,><@,===
@,=@B,===
@,=@B,===
The head of section further informs you that all receipts are banked intact
and all payments are made by #he"ue. $n investigation you discover the
following*
:. %ank charges and commissions amounting to 2h. <F<,=== entered on the
bank statement had not been entered in the cashbook.
<. #he"ues drawn amounting to 2h. >9@,=== had not been presented to the
bank for statement.
9. #he"ues received totalling 2h. :,><@,=== had been entered in the
cashbook and paid into the bank, but had not been credited by the bank
until 8ay <==9.
@. #he"ue for 2h. @@,=== had been entered as receipts in the cashbook
instead of a payment.
>. #he"ue for 2h. >=,=== had been debited by the bank by mistake.
B. check received for 2h. :B=,=== had been returned unpaid. 4o
ad5ustment had been made in the cash.book.
F. ll dividends receivable are credited direct to the bank account. !uring
the month of pril <==9, dividends totalling 2h. :<@,=== were credited by
the bank and no entries had been made in the cash.book.
?. #he"ue drawn for 2h. :<,=== had been incorrectly entered in the
cashbook as 2h. :9<,===.
H. The balance brought forward should have been 2h. :,@<<,===.
:=.The bank statement as at 9= pril <==9 showed an overdraft of 2h.
<,9<@,===.
Re*uired"
5i# The ad5usted cashbook as at 9= pril <==9. 5? $!r%s#
5ii#%ank reconciliation statement as at 9= pril <==9. 5? $!r%s#
5Tot!" 29 $!r%s#
9
>uestion T'o
&a' +xplain the term Nbank reconciliationO and state the reasons for its
preparation.
&B marks'
&b' 2semakula, a sole trader received his bank statement for the month of
Gune <==:. t that date the lank balance was 2h. F=B,>== whereas his
cashbook was 2h. <,9BB,>==. 0is accountant investigated the matter and
discovered the following discrepancies*
:. %ank charges of 2h. 9,=== had not been entered in the cash D book.
<. #he"ues drawn by 2semakula totalling 2h. <<,>== had not yet been
presented to the bank.
9. 0e had not entered receipts of 2h. <B,>== in his cash D book.
@. The bank had not credited 8r. 2semakula with receipts of 2h. H?,>== paid
into the bank on 9= Gune <==:.
>. 2tanding order payments amounting to 2h. B<,=== had not been entered
into the cash D book.
B. In the cash D book 2semakula had entered a payment of 2h. F@,H== as 2h.
FH,@==.
F. #he"ue for 2h. :>,=== from a debtor had been returned by the bank
marked Nrefer to drawerO but had not been written back into the cash D
book.
?. 2semakula had brought forward the opening cash balance of 2h. 9<H,<>=
as a debit balance instead of a credit balance.
H. n old #he"ue payment amounting to 2h. @@,=== had been written back
in the cash D book but the bank had already honoured it.
:=.2ome of 2semakula(s customers had agreed to settle their debts by
paying directly into his bank account. ,nfortunately, the bank had
credited some deposits amounting to 2h. ?9<,>== to another customer(s
account. 0owever, acting on information from his customers, 2semakula
had actually entered the expected receipts from the debtors in his cash D
book.
Required
*i) ! statement sho+ing ,semaku#a-s ad"usted cash . book
ba#ance as at $( /une '((%
*0 marks)
*ii) ! bank reconci#iation statement as at $( /une '((% *1
marks)
*Tota#) '( marks)
Su))ested Soution
&' Cefer to notes
&b'
Adjusted c!shboo% b!!nce
%alance as per cashbook <,9BB,>
==
7ess* bank charges 9===
10
2tanding order B<,===
!ishonored
che"ues
:>,===
#he"ues written
back
@@,===
+rror* opening
balance
B>?,>== &F?<,>=
='
dd error* Ceceipts <B,>==
+ntry @,>== PP9:,==
=
:,B:>,=
==
Sse$!%u!
B!n% reconcii!tion st!te$ent
As !t 39
th
;une 2991
%alance as per corrected cashbook :,B:>,===
dd ,npresented che"ues <<,>==
7ess ,ncredited che"ues P&H?,>=='
%alance per corrected bank
statement
:,>9H,===
Corrected b!n% st!te$ent b!!nce
2h.
%alance per statement F=B,>==
!irect credits PP?9<,>==
#orrect bank balance :,>9H,===
>uestion Three
trainee accountant working for a sole trader Guma 8amboleo, has prepared
the following summary of the cash book for the month of 8arch :HHH*
C!shboo%
Sh Sh7
$pening balance b;d >B:,=== 3ayments @,:?H,===
Ceceipts 9,F@?,=== #losing balance c;d :<=,===
@,9=H,=== @,9=H,===
/hilst checking the cash book against the bank statement, you fnd the
following discrepancies*
:. %ank charges 2h. ?,=== shown in the bank statement have not been
entered in the cash D book.
<. The bank has debited a #he"ue for 2h. 9F,=== in error to the accountants
of Guma 8amboleo.
11
9. #he"ues totaling 2h. HB,=== have not yet been presented to the bank for
payment.
@. !ividends received of 2h. @<,=== have been credited on the bank
statement but not yet recorded to Guma 8amboleo(s cash D book.
>. There were #he"ues received of 2h. @?@,===, which were entered in the
cashbook but not yet credited by the bank.
B. #he"ue for 2h. :F,=== has been returned by the bank marked Nrefer to
drawerO but no entry relating to this has been made in the books.
F. The opening balance in the cashbook should have been 2h. B>:,=== and
not 2h. >B:,===.
?. The bank statement shows that there is an overdraft at 9: 8arch :HHH of
2h. :H?,===.
Required)
*a),tate and brie2y e3p#ain t+o purposes o4 a bank reconci#iation
statement
*' marks)
*b)Entries necessary to correct the cashbook *5
marks)
*c)! bank reconci#iation statement as at $% 6arch %000
*%( marks)
*Tota#) '( marks)
>(ESTION T0REE
&a' Cefer to notes
b'
#orrected cashbook balance
%alance as per
cashbook
:<=,===
7ess* bank charges ?,===
!ishonored che"ues :F,=== &<>,==='
!ividends @<,===
+rror opening balance H=,=== :9<,===
<<F,===
#orrected bank statement balance
%alance as per bank statement &:H?,==='
+rror PP9F,===
#orrected bank balance &:B:,==='
#ashbook correction entries
!r #r
&i' #ashbook H=,===
2uspense H=,===
To correct opening balance error
12
&ii' #ashbook @,<==
!ividend income @,<==
To record direct dividend income credits
&iii' %ank charges ?,===
#ashbook ?,===
To record bank charges as per bank
statement
&iv' !ebtors :F,===
#ashbook :F,===
To record dishonored che"ue
c'
;u$! M!$boeo
B!n% reconcii!tions
As !t 31
st
M!rch 1@@@
%alance as per corrected cash book <<F,===
dd unpresented che"ues HB,===
7ess uncredited che"ues &@?@,==='
%alance as per bank statement
&corrected'
&:B:,==='
>uestion four
You are the accounts clerk of 2weetbread 7imited. Your main task is to enter
transactions into the company(s cashbook, check the entries against the bank
statement and prepare a monthly bank reconciliation 2tatement. The
cashbook &showing the bank money columns only' and bank statement for
!ecember <==@ are set out below.
2weetbread 7imited . #ash %ook
#20 %$$A
C+#+I3T2 3Y8+4T2
!ate !etails %ank !ate !etails %ank
<==@ )===( <==@ )===(
: !ec %alance bId <,><: : $ct Aodi K #o Cent @==
@ !ec
4akurumatt
7td
B<= @ $ct L $rwalo 9:<9@B 9BF
? !ec
#hun5u
/holesalers
<F > $ct
0awaliki K
#o
9:<9@F :,:=?
:: !ec
0awiki
7imited
@? ? $ct
+li5ah K
2on
9:<9@? 9<=
:: !ec %ubu5u :=B
:9
$ct
8uturi(s
Larage
9:<9@H 9<
13
:< !ec 2ealhoneyed 9=:
:@
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9: !ec %alance c;d B=@
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%alance
b;d
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2TT+8+4T
4ational %ank
ccoun
t
2weetbread 7imited
ccount
no.
?H9@>:<<
!ate 9: $ctober <==@
2tatement
4o. B>
!ate !etails
!ebi
t
#redit
%alanc
e
<==@ )===( )===( )===(
:!ec %alance <,><: #C
: !ec Aodi K #o &2$' @== <,:<: #C
@ !ec 4akurumatt 7td B<= <,F@: #C
F !ec 9:<9@B 9BF <,9F@ #C
:: !ec #he"ues :>@ <,><? #C
:9 !ec ! 3ambo 9=: <,?<H #C
:> !ec #he"ues <F <,?>B #C
:? !ec 9:<9@? 9<= <,>9B #C
:? !ec 9:<9@F
:,:=
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<< !ec Ikolomeni Insurance :9H :,<?H #C
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:,?=
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<H !ec %ank Interest
>
9
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@
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14
Ce"uired* !raw the bank reconciliation statement as at 9:
st
$ctober <==@.
15
>uestion -ive
-ollowing is the cashbook and bank statement for /achuuMi limited for the
month of 4ovember <==@. You are the cashier of /achuuMi 7imited and have
written up the frm1s cashbook
/achuuMi Trading 7imited . #ash %ook
#20 %$$A
C+#+I3T2 3Y8+4T2
!ate !etails %ank !ate !etails %ank
<==@ )===( <==@ )===(
: 4ov.
#hamachama
K #o
<,F:=
:
4ov.
%alance
bId
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B 4ov. #handaria 7td <><
9
4ov.
Gu5aCoad Larage
@@@999
<9B
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9
4ov.
/ages @@@99@ :,F<9
:= 4ov. %otima 9FH
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4ov.
$this
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Cushton
ssociates
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8adison Insurance :F>
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16
STANBIC BANK
BANK STATEMENT
To'n br!nch
ccount /achuuMi Trading 7imited
ccount no.
=:<@<:>@<:@=
!ate 9: Ganuary <=:= 2tatement 4o. =:@
!ate !etails
!ebi
t #redit %alance
<=:=
)===
( )===( )===(
: 4ov. %alance @<<9
!
C
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9 >H@B
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!
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8adison Insurance
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!
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17
Ce"uired*
!raw the bank reconciliation statement
>uestion Si<
&a' !efne the term bank reconciliation statement and indicate its three main
functions.
&B marks'
&b' Guhudi 7td. has two accounts QQ and Q%Q with diferent banks. $n 9:
8arch <==> the cashbook showed a balance of 2h.<==, === in account
NQ and an overdraft of 2h.H=, === in account Q%Q. 0owever the bank
statements obtained on the same day showed diferent balances for the
two accounts.
-urther investigation reveals the following information*
I deposit of 2h.B=, === made into account QQ on : 8arch <==>
has been entered in the cash book in account Q%Q.
<. withdrawal of 2h.<=, === from account QQ on 9 8arch <==> has
been debited in the cashbook in account Q%Q.
9. #he"ues of 2h.<>, === and 2h.9=,=== deposited in account QQ
on H 8arch <==> were entered in the cash book in account Q%Q.
The second che"ue has been dishonoured by the bankers. The
entry for this dishonoured che"ue has been entered in the cash
book in account Q%Q.
@. #he"ues for 2h.@=,=== and 2h.>==,=== drawn on accounts QQ
and Q%Q respectively on 9= 8arch <==> were not paid by the
banks until > pril <==>.
>. Incidental charges of 2h.@== and 2h.:, === charged in the
accounts QQ and Q%Q
respectively have not been entered in the cashbook.
B. The hank has credited an interest of 2h.<.=== for account QQ and
has
debited bank charges of 2h.:,>==.for account Q%Q. These
transactions have not
been entered in the cashbook.
F. !eposits of 2h.<==,=== and 2h.:@=,=== made into the accounts
QQ and
Q%Q respectively have not yet been credited by the banks.
?. !ividends amounting to 2h.?.=== had been paid direct to the bank
in account Q%Q.
H. che"ue for 2h.9,>== drawn on account QQ on 9= 8arch <==> in
payment of an electricity bill had been entered in the cash book as
2h.>,9==.
Re*uired"
*i) The necessary ad"ustments in both cash books in order to
correct the errors*%( marks)
*ii) Bank reconci#iation statements 4or both cashbooks*7 marks)
*Tota# '( marks)
S(==ESTE. SOL(TION
a' Cefer to notes
18
b' i# A.;(STE. CAS0 BOOK BALANCE
BANK )( )!(
%alance per cash book <==,=== &H=,==='
#orrections * deposits B=,=== &B=,==='
/ithdrawal &<=,===' <=,===
#he"ues i' <>,=== &<>,==='
ii' 9=,=== &9=,==='
!ishonored
che"ues
&9=,===' 9=,===
+lectricity :,?==
.
#orrected balance <BB,?== &:>>,==='
!irect credits* interest <,===
!ividend ?,===
%ank charges PPPPPPP &:,>=='
d5usted #% balance <B?,?== &:@?,>=='
.,n presented che"ues
%4A )( )%(
@=,=== >=,===
.,n credited che"ues <==,=== :@=,===
b'
BANK RECONCILIATION STATEMENT
AS AT 31
ST
MARC0 299A
%4A )( )%(
d5usted cashbook balance <B?,?== &:@?,>=='
dd unpresented che"ues @=,=== >=,===
7ess uncredited che"ues &<==,===' &:@=,==='
P:=?,?== P<9?,>==
>uestion seven
GG cashbook bank column for the month of !ecember <==9 was as follows*
!ate mt
.
!etails mt. !ate Inv. no !etails mt.
:;:<
@;:<
B;:<
:<;:<
:?;:<
=<=
=9H
=<B
:?B
%alance
b;d
8usa
Aimani
$tieno
Guma
>=,===
:>,===
:9,===
:B,===
<=,===
::@,==
=
9;:<
>;:<
?;:<
<B;:<
<<;:<
9:;:<
:<:
:<<
:<9
:<@
:<>
-urnitur
e
2alaries
AAA
Gogoo
$kumu
%alance
c;d
:>,===
:B,===
:>,===
:<,===
:=,===
@B,===
::@,==
=
0is bank statement as at that date was as follows
B!n% st!te$ent 31812893
19
!ate !etails !ebit #redit %alance
:;:<
9;:<
@;:<
>;:<
B;:<
B;:<
F;:<
:>;:<
<>;:<
9:;:<
%alance
:<:
=<=
:<<
7edger fees
=9H
Interest
Telcom
#ommunicati
on
%alance
:>,===
:B,===
:,===
<,===
:,===
.
>=,===
:>,===
:9,===
9,===
.
>=,===
9>,===
>=,===
9@,===
99,===
@B,===
@H,===
@F,===
@B,===
@B,===
Required)
Dra+ the bank reconci#iation statement
Su))ested soution
A.;(STE. CAS0BOOK AS AT 31812893
%alance as per cash book @B,===
7ess interest 9,===
7ess 7edger fees &:,==='
Telcom &<,==='
#ommissions &:,==='
d5usted cash book @>,===
BANK RECONCILIATION AS AT 31812893
d5usted cash book @>,===
dd unpresented AAA :>,===
Gogoo :<,===
$kumu :=,=== 9F,===
7ess unpresented che"ue $tieno &:B,==='
Guma &<=,===' &9B,==='
%alance as per bank statement @B,===
20