- 1 Marks
Question
The cash book shows an overdrawn bank balance of N65,000 at 30 September, 2014. It was subsequently discovered that a standing order of N12,500 has been recorded twice and that a dishonored cheque for N9,000 has been debited in the cash book instead of being credited. What is the correct bank balance?
A. N66,700 O/D
B. N67,500 O/D
C. N70,500 O/D
D. N71,600 O/D
E. N72,500 O/D
Answer
Answer: C. N70,500 O/D
Explanation:
The correct answer is C. The standing order, recorded twice, would have reduced the balance by N12,500, so adding this back corrects the balance. The dishonored cheque was incorrectly debited, meaning the balance was reduced by N9,000 instead of increased, so adding N9,000 back also adjusts the balance. Therefore, the correct bank balance is:
N65,000 + N12,500 + N9,000 = N70,500 (overdrawn).
Rundown:
This question tests the ability to make corrections to bank balances by identifying and adjusting for errors in the cash book, a fundamental concept in bank reconciliation.
- Tags: Bank Reconciliation, Cash Book, Correction of Errors, Overdrawn Balance
- Level: Level 1
- Topic: Bank reconciliations
- Series: NOV 2014
- Uploader: Dotse