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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  • 20 Marks

FA – May 2017 – L1 – Q3 – Bank reconciliations | Preparation of financial statements of a sole trader

Preparation of adjusted cash book, bank reconciliation, and corrected net profit statement for Unity Trading Enterprise.

The Income Statement of Unity Trading Enterprise (UTE) for the year ended 31 December 2016 as prepared by an Accounts Assistant indicated a net profit of GH¢49,360,000. However, the cash book on 31 December 2016 showed a balance at bank to be GH¢6,440,000. Your attention is however drawn to the following:

i) Cheques from customers totaling GH¢4,980,000 which were recorded in the cash book on 20 December 2016 were actually not credited by the bank until 2 January 2017.

ii) Cheques issued on 13 December 2016 totaling GH¢7,420,000 in favour of suppliers were actually not paid by the bank until after the end of the year (that is after 31 December 2016).

iii) On 22 November 2016, the bank paid an amount of GH¢3,600,000 with respect to a standing order from UTE for rent of business premises for the three months to 31 January 2017 but unfortunately, no entry for this payment had been made in the cash book. Additionally, no provision of this outstanding rent had been made in the income statement for the period.

iv) On 31 December 2016, a customer known as Mr. Abuusu had paid GH¢2,340,000 into UTE bank account through a standing order to his bankers in full settlement of a debit balance of GH¢2,400,000 in UTE sale ledger, but no entry had been made in the books.

v) On 30 December 2016, a cheque for GH¢480,000 was received from a customer in settlement of sales invoice for the same amount. The cheques were lodged into UTE bank account. Both sale of goods and the cheque were entered in UTE’s books. However, on 31 December 2016, the customer returned the goods and also instructed her bankers not to pay the cheque (This instruction was carried out the same day) but no entries in respect of these latter developments have been made in UTE’s books. The cost of these goods amounting to GH¢320,000 were not actually included in the closing inventories.

vi) A cheque for GH¢840,000 from an insurance company in settlement of claim for fire damage to inventory had been paid into the bank and credited by the bank on 21 December 2016, but an estimated amount of GH¢800,000 had been entered in UTE’s income statement.

Required:
a) Prepare a statement on 31 December 2016, indicating clearly the cash book balance. (5 marks)

b) Prepare the bank reconciliation statement for UTE. (5 marks)

c) Prepare a statement of corrected net profit of UTE on 31 December 2016. (5 marks)

d) Explain TWO reasons for carrying out bank reconciliation. (2 marks)

e) Explain why the bank statement is usually taken as being more accurate than the details that appear in the company’s own records. (2 marks)

f) Indicate how the bank balance will be reported in UTE’s final accounts. (1 mark)

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  • 20 Marks

FA – Nov 2015 – L1 – Q1 – Bank reconciliations

Discuss depreciation, useful life of fixed assets, factors causing depreciation, and prepare various accounts including adjusted cash book and bank reconciliation statement.

(a) Explain the following Terms:
i. Depreciation.
ii. Useful Life of a Fixed Assets. (4 marks)

(b) There are four (4) factors/causes that contribute to depreciation of a Fixed Asset. List these factors or causes. (2 marks)

(c) Atta Moses is a trader who prepares account to 31st December each year. The following transactions with regard to Assets have taken place:
i. 3rd January, 2010 purchased one Office Equipment (Laptop) for GH¢2,000.
ii. 5th July, 2011 purchased Plant and Machinery costing GH¢50,000.
iii. 1st December, 2011 purchased Plant and Machinery for GH¢20,000
iv. 15th December, 2012 bought Office Equipment (Printer) for GH¢1,000.

Mr. Atta maintains its Fixed Assets at cost and depreciates its Asset at a constant rate of 20% using the straight-line method of providing for depreciation for all Assets. Assets purchased attract full depreciation charge in the year of purchase, whilst any asset disposed of attracts no depreciation charge.

You are required to prepare the following:
i. Plant and machinery Account.
ii. Office Equipment Account.
iii. Provision for Depreciation Account. (6 marks)

(d) The following information was extracted from the records of Mama Constance, a Petty Trader as at 31st December, 2014. Balance as per Bank Statement as at 31st December, 2014 was GH¢10,000 credit. Cash Book balance was GH¢40,000 credit in the Bank Account column. The following had been reflected in the Bank Statement but not in the Cash Book:
i. Bank loan interest GH¢ 2,000
ii. Bank Charges GH¢ 6,000
iii. Dividends from Investment GH¢ 10,000
iv. Interest from Treasury Bill GH¢ 4,000

In addition, a cheque of GH¢ 20,000 issued to Madam Peace was dishonoured because of insufficient funds. A cheque of GH¢25,000 from Stephen has not been credited. A cheque of GH¢49,000 issued to Samuel remained unpresented.

You are required to prepare:
i. An adjusted Cash Book. (2 marks)
ii. Bank Reconciliation Statement as at 31st December, 2014. (6 marks)

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