Question Tag: Bank Reconciliation

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  • 10 Marks

FA – Nov 2024 – L1 – Q3b – Bank Reconciliation

Prepare an adjusted cash book and reconcile it with the bank statement balance.

The cash book of Lawra Ltd as at 31 December 2023 shows a balance of GH¢36,900, which does not match the bank statement balance of GH¢41,100. Investigation revealed the following discrepancies:

  1. Cheques received of GH¢104,000, GH¢10,000, and GH¢24,900 were still in the business drawer.

  2. Standing orders for electricity charges (GH¢2,400) and insurance (GH¢3,600) were paid by the bank but not recorded in the cash book.

  3. The bank charged GH¢300 for a cheque book issued to Lawra Ltd.

  4. The bank incorrectly debited GH¢9,910 to Lawra Ltd’s account, which was intended for another customer.

  5. A credit transfer of GH¢10,000 was received but not recorded in the cash book.

  6. A cheque for GH¢140,000 drawn by Lawra Ltd was correctly recorded in the cash book but was debited as GH¢14,000 by the bank.

  7. The following cheques, paid in November 2023, remained unpresented:

    Cheque Number Amount (GH¢)
    0000111 4,000
    0000117 10,000
    0000120 9,310

Required:

i) Prepare the adjusted cash book for Lawra Ltd as at 31 December 2023.

ii) Prepare a bank reconciliation statement reconciling the adjusted cash book balance to the bank statement balance.  

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  • 15 Marks

AAA – Nov 2023 – L3 – SC – Q6 – Internal Audit and Corporate Governance

Discusses control activities for Reliable Ltd and external auditor responsibilities in light of control gaps and bank requirements.

Reliable Limited is into wholesale and retail supply and distribution of stationeries to companies and educational institutions. The company maintains business relationships with other enterprises that are owned by close friends and relatives. The books of account of the company were kept manually and in simple Excel. The company had only a staff member in the accounts department since it is a small business operation.

A review of the company’s operations shows that inventory of stationeries purchased was not properly valued due to incomplete recording of purchases made. Although bank statements are obtained, the balances on the bank statements were not reconciled with the cash book.

Cash from sales made was not banked intact, and expenses relating to cash takings from the till were not all recorded or properly monitored. Added to this, goods bought from related parties were sometimes overvalued as suppliers made frivolous claims which could not be disputed due to poor record keeping. The Managing Director and owner of the company has been sick for some time, and the wife concentrated more on her own business, leaving the operations of the company to a relation who is not well educated. Available evidence revealed that invoices and vouchers of the company were approved without management review, and the procedure or selection of suppliers was not transparent.

The company has just won a contract for the supply of stationeries in one of the states in the Federation, and it was found that there was inadequate cash flow to execute the contract. The manager of the company informed the Managing Director’s wife of the development, and it was agreed that a bank loan would be needed. On approaching the bank, updated financial statements of the company were requested to determine the financial health of the business and ability to repay the loan when due.

Your firm has been appointed as auditors of the company with a stipulated deadline to complete the audit so that the company could meet the bank’s conditions. The firm has conducted a preliminary review of the operations of the company, and some control gaps have been noted.

Required:

a. Discuss suitable control activities that will be required in the above scenario and how you will assess the degree of effectiveness of the internal control systems.
(10 Marks)

b. Identify and explain what the external auditors are expected to do during the course of the above audit.
(5 Marks)

Total: 15 Marks

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  • 20 Marks

PSAF – May 2024 – L2 – SB – Q3 – Financial Reporting and Accountability in the Public Sector

Preparation of a bank reconciliation statement and discussion of challenges in e-payment.

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 fees, 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 a registration fee on March 31, 2020, and was duly entered into the cash book and taken to the bank on the same day but had not been credited as of the time the bank statement was collected.
  • Cheques amounting to N3,300,000, previously credited by the bank were dishonored.
  • A sum of N10,200,000 which was paid directly to the bank was received from the Abuja Alumni of the University in the form of aid, which the accountant has not recorded in the cash book, while an 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:
Mandate No. Beneficiary Amount (N)
0671420 SolarTech 90,000
0002418 GreenLaud 120,000
0021462 S-Publishers 15,000

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)

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  • 12 Marks

AA – Nov 2016 – L2 – Q3a – Internal Control Systems

his question identifies and evaluates internal control issues at Clear View Cinemas, including cash handling, ticketing, and reconciliation processes.

Clear View Cinemas Nigeria Limited operates in the entertainment industry in five different locations. Access into the Cinema Hall is based on tickets purchased at the point of entry. The entity’s ticketing process is manually driven. At the beginning of every day, the ticketing staff collects and signs for manual tickets from the Accountant. Unused tickets are returned to the Accountant, while the ticketing staff prepares a sales report for the day, which is reviewed and signed off by the Accountant. Concession items such as popcorn and soft drinks are also sold to customers. Both the ticketing and concession transactions are paid for in cash. All cash received is handed over to the Accountant who posts the transactions to SAGE Line 50 Application at the end of every day’s transactions. In view of the Company’s prime location and level of awareness, it records a high volume of transactions daily.
To ensure there are no delays in payment of routine bills and also reduce exposure to bank charges, the Accountant disburses cash from daily collections and the balance is lodged into the bank on an irregular basis. Bank reconciliation statements are prepared at the end of the financial year in readiness for the audit.

Required:
As the Auditor in charge of this engagement, identify and evaluate the relevant internal control issues in the above scenario.

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  • 15 Marks

FA – May 2012 – L1 – SB – Q4 – Bank Reconciliation

Identify causes of discrepancies between cashbook and bank statement and prepare bank reconciliation.

The general day-to-day banking activities of business enterprises are bound to generate large volumes of transactions to the extent that there are always disagreements between the bank balance shown in the accounts of an organisation and the balance shown in the bank statement.

(a) You are required to state any FIVE causes of disagreement between the cash book balance and the bank statement.
(5 marks)

(b) The cashbook of Ecobiz Plc showed an overdraft of N180,000 on 31 March 2011 while the bank statement balance was an overdraft of N1.6m. On checking the two records, you made the following discoveries:

  1. Cheques drawn in respect of payment made to suppliers amounting to N250,000 had been entered in the cash book but were yet to be presented to the bank.
  2. Ecobiz Plc instructed the bank to transfer interest of N40,000 due on its bank deposit account to the current account and this was not effected by the bank until April 2011 whereas the entries have been made in the cash book.
  3. The bank made e-payment charges of N50,000 on the company’s account.
  4. The receipt side of the cash book was overcast by N100,000 by the account clerk.
  5. Cheques received and deposited to the bank which amounted to N480,000 had been entered in the cash book but had not been credited by the bank.
  6. E-dividend payments made through the bank by the company amounting to N360,000 were yet to be posted in the company’s cashbook.
  7. A cheque issued for the purchase of office equipment had been entered in the bank statement as N800,000 instead of N300,000.
  8. A cheque for N70,000 issued to one of the suppliers included in (i) above had been erroneously posted on the wrong side of the cash book (i.e. the receipt side).

Prepare the adjusted cash book and a statement reconciling the amended balance with that shown in the bank statement.
(10 marks)

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  • 30 Marks

PSAF – May 2018 – L2 – Q1 – Introduction to Public Sector Accounting

Preparation of adjusted cash book and bank reconciliation, and reporting procedures for fraud in a public sector context.

It has become a very important task for Accounting Officers of Ministries, Departments, and Agencies (MDAs) to pay more attention to and make regular checks on their corporation’s cash books and bank accounts.

Internal control systems are usually put in place to prevent the possibility of committing errors and fraud. This has been more challenging and requires all accounting officers to be more knowledgeable in the act of keeping records. Every organization has to keep a close watch on its bank account transactions to guard against fraud or the infiltration of extraneous entries. This is done through regular preparation of bank reconciliation statements.

As a result of widespread internet fraud, the Accounting Officer of the Ministry of Land and Housing, Alhaji Maito Garba, has been concerned with the Ministry’s banking transactions. In recent times, there have been challenges reconciling the Ministry’s banking transactions. There was no time when the Ministry’s bank balance agreed with the cash book balance. However, there was no adequate information to suggest that there was fraud or misappropriation of funds. Nonetheless, Alhaji Maito Garba invited you to his office for professional advice.

He informed you that the Director of Finance of the Ministry had been avoiding him on matters relating to the Ministry’s bank and cash positions.

He also informed you that he was able to retrieve some of the finance department’s data, which he handed over to you as detailed below:

Transactions recorded in the books for the year ended December 31, 2017
(Amount in N’000)

Description N’000
Subvention received 55,000.00
Interest from investment 3,501.68
Rent on property 11,300.35
Ground rent 16,801.00
Saving deposits interest 6,281.00
Grants for construction of estates 51,301.50
Deposits for land 19,000.60
Personnel costs 36,801.00
Travel and transport 7,000.40
Telephone services 2,401.50
Repairs of property 4,868.25
Stationery 901.86
Provision of water for estate 14,300.60
Consultancy services 3,001.26
Training and staff development 1,001.56
Auditing and staff development 1,500.00
Entertainment and hospitality 500.00
Construction of estate 35,607.58
Construction of access roads 8,400.60
Cash book balance as at 1/1/2017 21,500.00

Preliminary investigations revealed the following information:

  1. 1,370 prospective landowners deposited N10,000 each, while 580 deposited N20,000 for high- and low-density areas of the estate, respectively.
  2. Included in the payments for the construction of the estate were various duplicated vouchers amounting to N9 million.
  3. The bank balance as per the statement on December 31, 2017, was N39,560,600.
  4. Uncredited cheques amounted to N6.9 million, while unpresented cheques stood at N4,337,800.
  5. There were some falsifications in the bills for items bought for the provision of water for the estate.

Required:

a. Prepare the adjusted cash book for the Ministry of Land and Housing for the year ended December 31, 2017. (10 Marks)

b. Prepare the bank reconciliation statement for the Ministry of Land and Housing as of December 31, 2017. (10 Marks)

c. Identify FOUR statutory institutions that the suspicious case(s) of fraud in (b) above could be reported to. (4 Marks)

d. State FOUR procedures that should be followed by the Accounting Officer in reporting the case(s) of fraud to the statutory institutions in (c) above. (4 Marks)

e. Identify TWO related offenses that two of the statutory institutions in (c) above can deal with in this case. (2 Marks)

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  • 1 Marks

FA – Nov 2011 – L1 – SA – Q3 – Bank Reconciliation

This question asks about the source document used to identify an uncredited lodgement.

What is the source document by which a bank reconciliation officer can identify an uncredited lodgement?

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  • 1 Marks

FA – Nov 2020 – L1 – SA – Q20 – Bank Reconciliation

Determines the correct overdraft position after reconciling bank errors.

Bode’s cash book showed he had an overdraft of N20,300. A bank reconciliation, however, indicated that a standing order payment of N3,650 had been entered in the cash book twice, and that a returned customer’s cheque for N2,750 had been debited in the cash account.

What is Bode’s true overdraft position?
A. N12,150
B. N18,450
C. N19,400
D. N21,200
E. N22,150

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  • 1 Marks

FA – Nov 2012 – L1 – SB – Q33 – Bank Reconciliation

Identify items required for cash book adjustment during bank reconciliation.

When preparing a company’s bank reconciliation statement at 31 October 2012, it was discovered that the following items caused the difference between the cash book balance and the bank statement balance:

A. Bank charges N5,005
B. Cheque of N105,000 incorrectly debited by the bank to the account
C. Cheque paid in by the company but dishonoured amounted to N55,500
D. Uncredited lodgement N62,800

Which TWO of the items above will be required for cash book adjustment?

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  • 1 Marks

FA – May 2014 – L1 – SA – Q7 – Bank reconciliations

This question tests knowledge of items requiring cash book adjustment in bank reconciliation.

During the preparation of your company’s bank reconciliation statement as at 31 October, 2013, you discovered that the following items caused the difference between the cash book balance and bank statement balance:

i. Bank charges N3,502 ii. Uncredited lodgement N75,000 iii. Cheque of N85,500 paid in by the Company but dishonoured iv. Amount of N225,000 incorrectly debited by the bank to the account

Which of the items above will be required for cash book adjustment?

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  • 6 Marks

FA – Mar 2024 – L1 – Q3b – Bank reconciliations

Prepare an adjusted cash book and a bank reconciliation statement following identified errors.

The accountant of Abeiku Ltd has prepared a trial balance but found that the total of debit balances is GH¢691,680 and the total of credit balances is GH¢689,720.

On investigation, the following errors were discovered in the book-keeping:

  1. Total purchases were recorded at GH¢80 below their correct value, although the total value of trade payables was correctly recorded.
  2. Total telephone expenses were recorded at GH¢800 above their correct amount, although the total value of the amounts payable was correctly recorded.
  3. Purchase returns of GH¢440 were recorded as a debit entry in the sales returns account, but the correct entry had been made in the trade payables control account.
  4. Equipment costing GH¢1,600 had been recorded as a debit entry in the repairs and maintenance account.
  5. Rental expenses of GH¢4,392 were entered incorrectly as GH¢4,932 in the expense account but were entered correctly in the bank account in the ledger.
  6. Bank charges of GH¢160 have been omitted entirely from the ledger.

Required:

i) Prepare journal entries for the correction of the errors. (6 marks)

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  • 14 Marks

FA – Mar 2024 – L1 – Q3a – Bank reconciliations

Prepare a bank reconciliation statement and an adjusted cash book for Malik & Company.

i) Mr. Malik is a sole trader and carries on business under the name “Malik & Company”. The balance on his cash book at 31 December 2023 did not agree with the balance as per the bank statement, which shows a credit balance of GH¢183,750.

An examination of the cash book and bank statement disclosed the following:

  1. A deposit of GH¢24,600 made on 29 December 2023 and recorded in the cashbook had been credited by the bank on 1 January 2024.
  2. Bank charges of GH¢850 have not been entered in the cash book.
  3. A debit of GH¢2,100 appeared on the bank statement for an unpaid cheque which had been returned marked “out of date”. The cheque was re-dated by his customer and paid into the bank again on 3 January 2024. The earlier transaction was recorded in the cashbook.
  4. A standing order for payment of an annual subscription amounting to GH¢500 has not been entered in the cash book.
  5. On 26 December 2023, Mr. Malik had given the cashier a cheque for GH¢5,000 to pay into his personal account at the bank. The cashier deposited it into the business account by mistake.
  6. On 27 December 2023, a customer had made an online transfer of GH¢24,950 in payment against goods supplied. The advice was received and recorded in the cash book on 2 January 2024.
  7. On 30 September 2023, Mr. Malik entered into a hire purchase agreement and issued a standing order to the bank to pay a sum of GH¢1,300 on day 10 of each month, commencing from October 2023. No entries have been made in the cash book for these payments.
  8. A cheque for GH¢18,200 received from Mr. Adoboe had been entered twice in the cash book.

Required:

i) Prepare the adjusted cash book for Malik & Company in a format which clearly indicates whether each entry is a debit or credit. (7 marks)

ii) Prepare a reconciliation of the bank statement balance to the adjusted cash book balance. (7 marks)

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  • 14 Marks

FA – Nov 2023 – L1 – Q3b – Bank reconciliations

Prepare an adjusted cash book and reconcile it with the bank statement for Mensah's account.

b) Mensah is preparing his bank reconciliation for the month of June 2022. His bank statement shows a balance of GHȼ1,824 cash at the bank. The balance on the cashbook in his general ledger is GHȼ645 (credit).

He has identified the following reasons for the difference:

  1. The bank has credited the account in error with GHȼ485, which belongs to another customer.
  2. A cheque drawn, amounting to GHȼ345, has been entered in the cashbook as GHȼ354.
  3. Bank charges of GHȼ320 on the bank statement have not been entered in the cashbook.
  4. Cheques totalling GHȼ664 have been correctly entered on the debit side of the cashbook but have not been paid in at the bank.
  5. A customer’s cheque for GHȼ460 was returned by Mensah’s bank in June as the customer had insufficient funds in his account. Mensah has not recorded the return of the cheque in his records.
  6. Six cheques have not yet been presented at the bank. These are:
Cheque No. Amount (GHȼ)
845763 550
845739 1,540 (see note 7)
846435 480
846502 380
846548 269
846582 200
Total 3,419
  1. Cheque number 845739 was lost and was cancelled. Mensah has not recorded the cancellation of the cheque.

Required:

i) Prepare the adjusted cashbook for Mensah in a format which clearly indicates whether each entry is a debit or credit. (7 marks)

ii) Prepare a reconciliation of the bank statement balance to the adjusted cashbook balance. (7 marks)

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  • 6 Marks

FA – Nov 2023 – L1 – Q3a – Bank reconciliations

Explain reasons for conducting a bank reconciliation and identify items that may appear in a bank reconciliation statement.

i) Explain THREE (3) reasons for carrying out a bank reconciliation. (3 marks)

ii) State THREE (3) items which may appear in the bank reconciliation statement. (3 marks)

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  • 20 Marks

FA – May 2021 – L1 – Q3 – Bank reconciliations

Preparation of an adjusted cash book, bank reconciliation statement, and explanation of the petty cash book operations.

a) On 4 April 2020, Kofi Ntam received his bank statements for the month ended 31 March 2020. The bank statement showed a balance of GH¢417,400 (overdraft) as at 31 March, whilst the cash book showed a balance of GH¢525,990 (credit) as at that date. Upon examination of the cash book and the bank statement, the following were discovered:

  • Bank charges of GH¢2,010 had not been recorded in the cash book.
  • Kofi Ntam exceeded his overdraft limit during the month of March. The bank had therefore charged a penalty of GH¢2,500. This has not been recorded in the cash book.
  • A sum of GH¢12,500 had been wrongly credited to Kofi Ntam’s bank account by the bank.
  • A cheque for GH¢12,300 had been returned by the bank as dishonored. As the cheque had been dishonored, the bank charged Kofi Ntam GH¢150. This has not reflected in the cash book.
  • Cash receipts of GH¢37,400 were posted as cash payment of GH¢47,300 in the cash book.
  • On 21 March, Kofi Ntam deposited an amount of GH¢6,500 into his personal bank account. This was deposited to the business bank account in error by the bank.
  • Standing orders and direct debits of GH¢11,150 had not been posted to the cash book.
  • Customers had deposited GH¢21,700 directly to the bank account. This has not been recorded in the cash book.
  • Receipts of GH¢51,200 deposited to the bank account on 31 March 2020, had not been credited by the bank.
  • The following cheques, drawn on the bank account, had not been presented to the for payment as at 31 March 2020:
Cheque Number Date Cheque was Written Amount (GH¢)
No. 45280 11 March 2020 8,400
No. 45350 28 March 2020 17,400
No. 45370 31 March 2020 36,700

Required:
i) Prepare the adjusted cash book for the month of March 2020.
(8 marks)

ii) Prepare a statement on 31 March 2020 reconciling the adjusted cash book with the bank statement balance.
(6 marks)

iii) Explain TWO (2) reasons for preparing bank reconciliation on a regular basis.
(2 marks)

b) A petty cash book is created to facilitate small payments in a business or organization. It is meant to meet the day-to-day expenses and it is entrusted into the hands of the petty cashier.

Required:
Prepare a brief note to Kofi Ntam explaining how the petty cash book operates.
(4 marks)

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  • 20 Marks

FA – May 2020 – L1 – Q3 – Bank reconciliations | Correction of errors

This question involves preparing an adjusted cash book, reconciling it with the bank statement, and explaining the reasons for regular bank reconciliation.

a) On 15 October 2019, Mr. Ladzagla received his bank statement for the month ended 30 September 2019. The statement showed a balance of GH¢208,700 (overdraft) as at 30 September, while the cash book showed a balance of GH¢262,995 (credit) as at that date.

On examination of the cash book and the bank statement, the following were discovered:

i) Mr. Ladzagla exceeded his overdraft limit during the month of September. The bank had therefore charged him a penalty of GH¢1,250. This has not been effected in the cash book.
ii) A sum of GH¢6,250 had been credited to Ladzagla’s bank account in error by the bank.
iii) Bank charges of GH¢1,005 had not been recorded in the cash book.
iv) A cheque for GH¢6,150 had been returned by the bank as dishonoured. Due to the dishonoured cheque, the bank charged Ladzagla GH¢75. Both the dishonoured cheque and the fee charged have not been effected in the cash book.
v) Cash receipts of GH¢18,700 were posted as cash payment of GH¢23,650 in the cash book.
vi) On 21 September, Mr. Ladzagla lodged cash of GH¢3,250 to his personal bank account. This was lodged into the business bank account in error by the bank.
vii) Standing order and direct debits of GH¢5,575 had not been posted to the cash book.
viii) Payment of GH¢10,850 received from customers had been lodged in the bank account but is yet to be posted to the cash book.
ix) Lodgements of GH¢25,600 to bank on 30 September 2019 had not been credited by the bank.
x) The following cheques drawn on the bank accounts had not been presented to the bank for payment as at 30 September 2019:

Cheque Number Date cheque was written Amount (GH¢)
No. 3528 11 September 2019 4,200
No. 3535 28 September 2019 8,700
No. 3557 30 September 2019 18,350

Required:
i) Prepare the adjusted cash book for the month of September 2019. (8 marks)
ii) Prepare a statement on 30 September 2019 reconciling the adjusted cash book with the bank statement balance. (8 marks)
iii) State TWO (2) reasons for preparing bank reconciliation on a regular basis. (4 marks)

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  • 20 Marks

FA – Nov 2019 – L1 – Q3 – Bank reconciliations

Prepare bank reconciliation, adjust the cash book, and explain the reasons for bank reconciliation preparation.

Yevugah has provided you with the following bank statement and bank account details in respect of the month ended 31 January 2018.

Statement Date: 31 January 2018
Account No: 13456892

Date Particulars Debit (GH¢) Credit (GH¢) Balance (GH¢)
01-Jan-18 Balance forward 55,940 Cr
03-Jan-18 Cheque 596 2,500 53,440 Cr
03-Jan-18 Lodgement 14,140 67,580 Cr
06-Jan-18 Cheque 597 120 67,460 Cr
06-Jan-18 Direct debit 2,020 65,440 Cr
12-Jan-18 Credit transfer 4,660 70,100 Cr
13-Jan-18 Cheque 600 1,420 68,680 Cr
14-Jan-18 Cheque 601 12,028 56,652 Cr
16-Jan-18 Lodgement 9,000 65,652 Cr
19-Jan-18 Cheque 599 18,004 47,648 Cr
23-Jan-18 Bank charges for December 2017 422 47,226 Cr
25-Jan-18 Quarterly interest received 62 47,288 Cr
27-Jan-18 Dishonoured cheque 1,600 45,688 Cr
27-Jan-18 Cheque 598 26,090 19,598 Cr
30-Jan-18 Cheque 603 5,048 14,550 Cr
31-Jan-18 Lodgement 14,500 29,050 Cr
31-Jan-18 Standing order: rent first quarter 2018 27,000 2,050 Cr

The books and records of Yevugah show the following transactions through the bank account for the month of January 2018:

Required:

a) Prepare Yevugah’s adjusted cash book including the necessary correcting entries as at 31 January 2018. (The answer format must clearly indicate whether each entry is a debit or credit). (10 marks)

b) Prepare a bank reconciliation as at 31 January 2018. (4 marks)

c) Explain TWO (2) reasons for preparing a bank reconciliation. (6 marks)

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