- 20 Marks
Question
a. Differentiate between unapplied mandate and uncredited cheques. (5 Marks)
b. The Account Officer of University of Igbokuenu, Abia, supplied the following information for Asejere Bank for the month ended March 31, 2020. On the same date, the balance as per the bank statement was a credit balance of N26,229,000,while, the cash book showed a debit balance of N12,063,000.
The investigation carried out by the accounts officer revealed the following:
There was a bank charge amounting to N15,000 for administrative fee, which had been deducted by the bank but no entry was made in the cash book.
A commission on turnover (COT) of N30,000 for the month of February had not been recorded in the cash book.
Interest of 2% was paid on an endowment fund of N127,500,000, which was maintained in a fixed deposit account in Kazua Bank. This was paid directly to Asejere Bank PLC, but has not been recorded in the cash book, while an investment income amounting to N60,000 was also received directly by the bank but has no entry in the cash book.
A cheque of N24,000 was received from B-Engineering services as registration fee on March 31, 2020 and was duly entered into the cash book and taken to the bank same day but had not been credited as at the time the bank statement was collected.
Cheques amounting to N3,300,000, previously credited by the bank were dishonoured.
A sum of N10,200,000 which was paid directly to the bank was received from the Abuja Alumni of the University in form of aid which the accountant has not been recorded in the cash book while additional N4,500,000 aid was received from USAID but not recorded in the cash book.
Mandate numbers, which were issued by the University to the bank for payments to beneficiaries in March 2020 were yet to be applied with details as follows:
Required:
i. Prepare a bank reconciliation statement for the period ended March 31, 2020
(10 Marks)
ii. Identify and explain FIVE challenges of bank reconciliation under the e- payment system.
(5 Marks)
Answer
| Mandate No. | Beneficiary | Amount (N) |
|---|---|---|
| 0671420 | SolarTech | 90,000 |
| 0002418 | GreenLaud | 120,000 |
| 0021462 | S-Publishers | 15,000 |
| Answer: | ||
| a. | ||
| An unapplied mandate is when a payment is made through a mandate to a | ||
| bank which is reflected in the credit side of a cash book as being paid out but | ||
| not reflected in the bank statement as a result of the following reasons: | ||
| i) Delay arising from the failure of e-payment network put in place to | ||
| facilitate payment; | ||
| ii) Delay from the bank in posting the mandate; and | ||
| iii) Failure of the bank to post according to the mandate instructions. |
Whereas uncredited cheque is a cheque paid into the bank but has not been cleared as at the date of the bank balance. Since the cheque has not been cleared, the bank does not add the value of the cheque to the balance in the account. However, in the cash book of the business the deposit would have been included as part of the cash in the bank.
b. (i)
University of Igbokokuwenu, Abia
Bank reconciliation statement for the month ended March 31, 2020
| N | N | |
|---|---|---|
| Cash book balance for the month ended March 31, 2020 | 12,063,000 | |
| Add: | ||
| Unpresented/unapplied mandates (Wk1) | 225,000 | |
| Receipts in bank but not in cash book (Wk 2) | 17,310,000 | 17,535,000 |
| Less: | ||
| Receipts in cash book but not in bank (Wk 3) | 3,324,000 | |
| Debits in bank not yet in cash book (Wk 4) | 45,000 | 3,369,000 |
| Balance as per bank statement | 26,229,000 |
Workings notes: i) Unpresented/unapplied mandates
| Mandate No. | Beneficiary | N | N |
|---|---|---|---|
| 0671420 | Solar Tech | 90,000 | |
| 0002428 | Green Laud | 120,000 | |
| 0021462 | S-Publishers | 15,000 | 225,000 |
ii) Receipts in bank but not in cash book
| N | N | |
|---|---|---|
| 2% Interest on an endowment fund of N127,500,000 | 2,550,000 | |
| Investment income | 60,000 | |
| Aid received by the alumni of the university | 10,200,000 | |
| USAID donations | 4,500,000 | 17,310,000 |
iii) Receipts in cash book but not in bank
| N | N | |
|---|---|---|
| B-Engineering services registration fees | 24,000 | |
| Dishonoured cheque | 3,300,000 | 3,324,000 |
iv) Debits in bank not yet in cash book
| N | N | |
|---|---|---|
| Bank charges | 15,000 | |
| Commission on turnover (COT) | 30,000 | 45,000 |
(ii) Challenges of bank reconciliation statement under e-payment system. The following are the challenges of bank reconciliation under the e-payment system:
Network failure which slows down the pace of reconciliation process;
The mandate numbers in the cash book can be posted differently from the ones of the bank statements resulting in difficulty in matching items in the cash book with the ones in the bank statements;
Splitting of items on a mandate by the banks. For example, a mandate for a total payment of N150,000 to three individuals equally, can be split by the bank as three different payments of N50,000 each in the bank;
Absence or inadequate description of transactions in the bank statement;
Delay in obtaining bank statements from the banks;
Posting errors on the part of the banks; and
Posting errors from the schedule officers of the MDAs.
- Tags: Bank Reconciliation, Challenges, E-Payment System, Unapplied Mandate, Uncredited Cheques
- Level: Level 2
- Uploader: Samuel Duah