IA – OCT 2022 – L1 – Q4 – Bank Reconciliation

Prepare adjusted cash book, reconcile with bank statement, and state reasons for differences using given records.

Question

The Bank Statement of Donfa Ltd for the month of July 2022 is reproduced below:
February
| Date | Particulars | Amount GH¢000 | Balance GH¢000 | |——|————-|—————|—————-| | 1 | Balance b/d | | (779,550) | | 8 | K Adusah | 18,300 | (797,850) | | 16 | Cheque | 36,600 | (761,250) | | 21 | Kakra | 31,200 | (792,450) | | 22 | Cheque | 49,950 | (742,500) | | 28 | Bongoman – trade’s credit | 8,550 | (733,950) | | 28 | Standing Order – Employers’ Association | 7,350 | (741,300) | | 28 | Bank charges| 4,200 | (745,500) |

The Cash Book for the same Company also showed the following record for the same period.
Cash Book (Bank Column only)

Date	Particulars	Bank GH¢000	Date	Particulars	Bank GH¢000
Feb.			Feb.
16	Abotre Ent.	36,600	1	Balance b/d	779,550
22	K. Abebrese	49,950	4	K. Adusah	18,300
28	K. Boni	24,000	25	Kakra	31,200
28	Balance c/d	792,000	25	Okanididi Ent.	73,500
		902,550			902,550

From the above records you are required to:
a) Prepare the adjusted cash book (5 marks)
b) Reconcile the bank statement with the Cash Book (5 marks)
c) State five reasons why the balance of the Cash Book may not be the same as the balance of the bank statement. (10 marks)
(Total: 20 marks)

Answer

The balances are treated as overdraft (negative), with figures in GH¢000. The cash book shows an ending overdraft of GH¢792,000 (balance c/d on debit side indicating overdraft amount).

a) Adjusted Cash Book
Start with the cash book balance (overdraft) of (792,000).
Items in bank statement not recorded in cash book:

Bongoman trade’s credit: +8,550 (credit, reduces overdraft)
Standing order: -7,350 (debit, increases overdraft)
Bank charges: -4,200 (debit, increases overdraft)

Adjusted balance = (792,000) + 8,550 – 7,350 – 4,200 = (792,000) – 3,000 = (795,000)

Adjusted Cash Book (Bank Column)

Date	Particulars	Bank GH¢000	Date	Particulars	Bank GH¢000
Feb.			Feb.
16	Abotre Ent.	36,600	1	Balance b/d	779,550
22	K. Abebrese	49,950	4	K. Adusah	18,300
28	K. Boni	24,000	25	Kakra	31,200
28	Bongoman (credit)	8,550	25	Okanididi Ent.	73,500
28	Balance c/d	795,000	28	Standing order	7,350
			28	Bank charges	4,200
		914,100			914,100

Balance c/d (overdraft) = 795,000 on debit side.

b) Bank Reconciliation Statement as at 28 February
Balance as per adjusted cash book (overdraft) (795,000)
Add: Unpresented cheques (Okanididi Ent.) 73,500
Less: Uncredited deposits (K. Boni) 24,000
Balance as per bank statement (overdraft) (745,500)

Explanation: Unpresented cheques are payments recorded in cash book but not yet debited by bank, so added back. Uncredited deposits are receipts recorded in cash book but not yet credited by bank, so subtracted.

c) Five reasons for differences between cash book and bank statement balances:

Timing differences: Cheques issued but not presented (unpresented cheques) or deposits not cleared.
Bank charges or interest: Fees or credits applied by bank not yet recorded in cash book, as per BoG’s operational standards.
Standing orders or direct debits: Automatic payments by bank not entered in cash book.
Direct credits: Customer payments directly into bank (e.g., trade credits) not recorded in cash book.
Errors: Mistakes in recording by company or bank, such as transposition errors, requiring reconciliation for compliance.

Tags: Adjusted Cash Book, Bank Reconciliation, Bank Statement, Cash Book, Differences Between Cash Book and Bank Statement
Level: Level 1

Topic: Accounting Records
Series: OCT 2022

Uploader: Samuel Duah