Chapter 7

Exercise 7.1
a
1 Tickets should be issued whenever money is received from customers.
2 Employees should not count their own takings.
3 Employees should not also write entries in the cash records.
4 Money should not be kept in the desk drawer.
5 The accuracy of Nick’s records must be questioned.
6 The amount of cash actually received may never be known.
b
1 Customers should buy tickets from a central area.
2 Tickets should be colour coded for particular rides.
3 Each employee working on a ride should tear the tickets in half and deposit the stubs
into a sealed container to prevent re-use of tickets.
4 All tickets should be pre-printed with sequential numbers.
5 Ticket numbers for all rides should be listed at the start and end of each day’s trading.
6 Cash received by the ticket box should be removed periodically during the day’s
trading and stored under lock and key (perhaps a safe?).
7 Nick should reconcile the money received with the number of tickets issued each day.
8 Cash takings should be banked intact each working day.
By following these steps, Nick will still be able to identify both the popular and unpopular
rides. However, with the built-in control devices, the money received by the business
should all be banked and Nick will have better control over the firm generally.

Exercise 7.2
S.O. Heater Installations: Bank reconciliation statement as at 31 July 2015
$
Balance as per bank statement 400 CR
plus Deposits not yet credited 80
480
less Unpresented cheques
Chq. No. Amount
4561 180
4562 225 405
Balance as per cash records of business 75

Permission is granted for this page to be printed by the purchasing institution. 1

Copyright Macmillan Education Australia 2011.
Exercise 7.3
G.T. Car Detailing: Bank reconciliation statement as at 31 August 2015
$
Balance as per bank statement 625 CR
plus Deposits not yet credited 145
770
less Unpresented cheques
Chq. No. Amount
347827 122
347831 340 462
Balance as per cash records of business 308

Adjustments to cash records of business  

$
Balance as per business records 220
plus Additional receipt
Interest 110
330
less Additional payments
Bank charges 22
Adjusted balance as per business records 308

Exercise 7.4
a Doncaster Glaziers: Update the cash journals
Cash receipts journal     Cash payments journal   
Total receipts already 494
recorded 3168 Total payments already recorded 3
Additional
plus Additional receipts 0 plus payments
Total cash receipts for
month 3168 Bank charges 13
495
Total cash payments for month 6

b Doncaster Glaziers: Calculation of cash balance according to the firm’s

records
$
Balance as at 1-Mar-15 2400
plus Cash receipts
journal 3168
5568
less Cash payments
journal 4956
Balance as at 31-Mar-15 612

Permission is granted for this page to be printed by the purchasing institution. 2

Copyright Macmillan Education Australia 2011.
c Doncaster Glaziers: Bank reconciliation statement as at 31 March 2015
$
Balance as per bank statement 821 CR
plus Deposits not yet credited 198
1019
less Unpresented cheques
Chq. No. Amount
24140 154
24141 253 407
Balance as per cash records of business 612

Exercise 7.5
a Snorter and Snorter: Update the cash journals
Cash receipts journal     Cash payments journal    
$ $
Total receipts already recorded 2761 Total payments already recorded 7341
plus Additional receipts 0 plus Additional payments
Amoun
Total cash receipts for month 2761 Item t
Loan r/p 100
Bank charges 14 114
Total cash payments for month 7455

Calculation of cash balance according to the firm’s records:

$
Balance as at 1-Jun-15 5000
plus Cash receipts for month 2761
7761
less Cash payments for month 7455
Balance as at 30-Jun-15 306

b Snorter and Snorter: Bank reconciliation statement as at 30 June 2015

$
Balance as per bank statement 295 CR
plus Deposits not yet credited 363
658
less Unpresented cheques
Chq. No.
65418 352
Balance as per cash records of business 306

Permission is granted for this page to be printed by the purchasing institution. 3

Copyright Macmillan Education Australia 2011.
Exercise 7.6
a Prahran Plumbing: Update the cash journals
Cash receipts journal Cash payments journal
$ $
Total receipts already recorded 11370 Total payments already recorded 11490
plus Additional receipts 0 plus Additional payments
Total cash receipts for month 11370 Item Amount
Misc. Dr. 340
Qtly fee 20
Bank charges 6 366
Total cash payments for month 11856

b Prahran Plumbing: Calculation of cash balance according to the firm’s records

$
Balance as at 1-Sep-15 1350
plus Cash receipts for month 11370
12720
less Cash payments for month 11856
Balance as at 30-Sep-15 864

c Prahran Plumbing: Bank reconciliation statement as at 30 September

2015
$
Balance as per bank statement 5884 CR
plus Deposits not yet credited 3000
8884
less Unpresented cheques
Chq. No. Amount  
18094 220
18097 6000
18101 1800 8020
Balance as per cash records of business 864

d Explanation of entry on 26 September:

‘Misc Dr’ is used to denote a miscellaneous debit and is often used when a cheque is
dishonoured (that is, when a cheque ‘bounces’). In this case it appears that the deposit
made on 24 September for $340 has not been honoured. Therefore the bank has
cancelled this amount by the ‘Misc. Dr.’ entry.

Permission is granted for this page to be printed by the purchasing institution. 4

Copyright Macmillan Education Australia 2011.
Exercise 7.7
a Rogers Gym Hire: Update the cash journals
Cash receipts journal    Cash payments journal  
$ $
Total receipts already recorded 6540 Total payments already recorded 6660
plus Additional receipts 0 plus Additional payments
Total cash receipts for month 6540 Item
Bank charges 15
Total cash payments for month 6675

b Rogers Gym Hire: Calculation of cash balance according to the firm’s records
$
Balance as at 1-Nov-15 140
plus Cash receipts for month 6540
6680
less Cash payments for month 6675
Balance as at 30-Nov-15 5

c Rogers Gym Hire: Bank reconciliation statement as at 30 November 2015

$
Balance as per bank statement 325 CR
plus Deposits not yet credited 1960
2285
less Unpresented cheques
Chq. No. Amount
58248 120
58254 60
58255 2100 2280
Balance as per cash records of business 5

d Explanation: possible suggestions could include:

1 The deposit may not have been processed by the bank before the statement was
issued on that day.
2 The deposit may have been made via a night safe and has therefore not yet been
processed.
3 The statement may have been issued at the start of the day and the deposit was made
towards the end of the business day.

Permission is granted for this page to be printed by the purchasing institution. 5

Copyright Macmillan Education Australia 2011.
Exercise 7.8
a Ken Barbie: Electrical Contractor: Update of cash journals
$ $
Balance as per business records on 1-Jul-15 1400
Plus Cash receipts journal 5900
7300
less Cash payments
Total from the cash payments journal 3270
plus Additional items
Item
Loan repayment 350
Loan fee 10
Misc. Dr. 1820
Bank charge 16 5466
Adjusted balance as per business records as at 31-Jul-15 1834

b Ken Barbie: Electrical Contractor: Bank reconciliation statement as at 31 July

2015
$
Balance as per bank statement 404 CR
plus Deposits not yet credited 1920
2324
less Unpresented cheques
Chq. No. Amount
12456 250
12458 240 490
Balance as per firm's cash book 1834

Exercise 7.9
a Bendigo Computers: Update the cash journals
Cash receipts journal     Cash payments journal   
$ $
Total receipts already Total payments already 5292
recorded 45795 recorded 7
Additional
plus Additional receipts plus payments
0 Overdraft fee 20
Total cash receipts for month 45795 Bank charges 10
Total cash payments for 5295
month 7
b Bendigo Computers: Calculation of cash balance according to the firm’s
records
$
Balance as at 1-Jul-15 0
plus Cash receipts journal 45795
45795
less Cash payments journal 52957
Balance as at 31-Jul-15 (7162)
c Bendigo Computers: Bank reconciliation statement as at 31 July
2015
$

Permission is granted for this page to be printed by the purchasing institution. 6

Copyright Macmillan Education Australia 2011.
Balance as per bank
statement 5402 OD
plus Unpresented cheques
Chq. No. Amount
009 1540
012 297 1837
7239
less Deposits not credited 77
Balance as per cash records of business 7162 OD

Exercise 7.10
a L.P.'s Music Hire
Calculation of bank balance according to business records:
$ $
Balance as at 1 August 1860
plus Cash receipts journal 9262
Additional receipts
Interest on bonds 100 9362
11222
less Cash payments journal 16325
Additional payments
Loan repayment 1600
Bank charges 25 17950
Adjusted balance of business records (6728)

b L.P.'s Music Hire: Bank reconciliation statement as at 31 August

2015
$
Balance as per bank statement 4713 OD
plus Unpresented cheques
Chq. No. Amount
83847 640
83851 1540
83853 770 2950
7663
less Deposits not credited 935
Balance as per cash records of business 6728 OD

c Comment on the cash position:

The owner needs to do something very quickly. The overdraft limit is $5000 and the
balance according to the bank is an overdraft of $4713. When the unpresented cheques
are presented for payment, they will drag the balance past the overdraft limit. Therefore,
the owner may have to contribute some additional cash or make arrangements for
alternative finance (perhaps increase the overdraft limit or arrange a loan).

Permission is granted for this page to be printed by the purchasing institution. 7

Copyright Macmillan Education Australia 2011.
Exercise 7.11
a Windy Hill Laundry Services
Adjustments to cash records of business
$ $
Balance as per business records 350
less Additional payments
Loan repayment 550
Bank charges 35 585
(235)
Adjustment  
Error in receipts journal 9
Adjusted balance of business records (226)

b Windy Hill Laundry Services: Bank reconciliation statement as at 30 November 2015

$ $
Balance as per bank statement 581 OD
plus Unpresented cheques
Chq. No. Amount
298111 95
298117 120 215
796
less Deposits not credited 570
Balance as per cash records of business 226 OD

c Explanation:
Timing differences between the two entities cause the discrepancy in the bank balance.
There are two major reasons why Cheryl's balance is different to that shown on the bank
statement. Firstly, she is aware of the $570 deposited on 30 November but this hasn't
been recorded by the bank as yet. Secondly, the loan repayment has been paid as a direct
debit and Cheryl's books do not include this payment. These two items combined cause
the bank's records to show a much worse situation than that shown in Cheryl's records.

Exercise 7.12
a John's Landscaping Services
Adjustments to cash records of business
$ $
Balance as per business records 4424 OD
plus Additional payments
Bank charges 32
Loan service fee 25 57
4481
less Additional receipts
Interest—term deposit 120
Adjusted balance of business records 4361 OD

Permission is granted for this page to be printed by the purchasing institution. 8

Copyright Macmillan Education Australia 2011.
b John's Landscaping Services: Bank reconciliation statement as at 31 October 2015
$ $
Balance as per bank statement 3434 OD
plus Unpresented cheques
Chq. No. Amount
13962 210
13968 430
13976 132
13982 245
13987 360 1377
4811
less Deposits not credited 450
Balance as per cash records of business 4361 OD
c Explanation—two reasons the cheques have not yet been presented:
1 they may be lost in the mail
2 they may have been sent to the wrong address, or
3 they may have been sent correctly, but the payee has not yet banked them.

Exercise 7.13
a Burlak's DVD Hire
Adjustments to cash records of business
$ $
Balance as per business records 1220 OD
plus Additional payments
Bank charges 28
Misc. debit 200
Interest 22
Loan repayment 650 900
2120
less Additional receipts
0
Adjusted balance of business records 2120 OD
b Burlak's DVD Hire: Bank reconciliation statement as at 31 July
2015
$ $
Balance as per bank statement 120 CR
plus Deposits not credited 500
620
less Unpresented cheques
Chq. No. Amount
699027 1940
699042 350
699051 450 2740
Balance as per cash records of business (2120) OD
c Reasons for doing a bank reconciliation monthly (choose any two of the following):
1 To update the firm's records with 'unknown' items.
2 To check the accuracy of the firm's records.
3 To ensure that the bank has recorded everything accurately.
4 To reduce the likelihood of fraud or theft.
5 To identify cheques that are unpresented for an extended period of time.

Permission is granted for this page to be printed by the purchasing institution. 9

Copyright Macmillan Education Australia 2011.
Exercise 7.14
a Seoud's Suit Hire
Adjustments to cash records of business  
$
Balance as at 1 August 2015 (2750)
plus Adjusted receipts journal 4422
1672
less Adjusted payments journal (8495)
Balance as at 31 August 2015 (6823)

b Seoud's Suit Hire: Bank reconciliation statement as at 31 August

2015
$ $
Balance as per bank statement 1552 OD
plus Unpresented cheques
Chq. No. Amount
315423 1190
315435 2530
315440 198
315441 1650
315443 385 5953
7505
less Deposits not credited 682
Balance as per business records (6823)

Exercise 7.15
a Easy Equipment Hire: Reconciliation of records for September
Adjustments to cash records of business  
$ $
Balance as per business records 594
less Additional payments
Loan repayment 500
Bank charges 30 530
64
plus Additional receipts
nil 0
Adjusted balance of business records 64

Easy Equipment Hire: Bank reconciliation statement as at 30 September 2015

$ $
Balance as per bank statement 930
plus Deposits not credited 290
1220
less Unpresented cheques
Chq. No. Amount
20039 386
20051 480
20052 290 1156
Balance as per business records 64

b Easy Equipment Hire: Reconciliation of records for October

Permission is granted for this page to be printed by the purchasing institution. 10

Copyright Macmillan Education Australia 2011.
Adjustments to cash records of business  
$ $
Balance as per business records (52) OD
plus Additional payments
Loan repayment 500
Misc. debit 365
Bank charges 38 903
(955)
less Additional receipts
Interest on bonds 95
Adjusted balance of business records (860) OD

Easy Equipment Hire: Bank reconciliation statement as at 31 October 2015

$ $
Balance as per bank statement 120 DR
plus Deposits not credited 320
440
less Unpresented cheques
Chq. No. Amount
20039 386
20061 450
20072 464 1300
Balance as per business records (860) OD

Exercise 7.16
a Brunswick Catering Supplies: Update the cash journals
Cash receipts journal for October Cash payments journal for October  
$ $
Total receipts already recorded 7690 Total payments already recorded 11490
plus Additional receipts plus Additional payments
Interest 40 Bank charges 25
Total cash receipts for month 7730 Loan fee 100
Total cash payments for month 11615

Calculation of cash balance according to the firm’s records:

$
Balance as at 1-Oct-15 (200) OD
plus Cash receipts journal 7730
7530
less Cash payments journal 11615
Balance as at 31-Oct-15 (4085) OD

b Brunswick Catering Supplies: Bank reconciliation statement as at 31 October 2015

$ $

Permission is granted for this page to be printed by the purchasing institution. 11

Copyright Macmillan Education Australia 2011.
Balance as per bank statement 3085 OD
plus Unpresented cheques
Chq. No. Amount
493461 1000
493463 960 1960
5045
less Deposits not credited 960
Balance as per business records 4085 OD

c Brunswick Catering Supplies: Update the cash journals

Cash receipts journal for November Cash payments journal for November
$ $
926
Total receipts already recorded 11680 Total payments already recorded 0
plu
plus Additional receipts s Additional payments
0 Bank charges 30
929
Total cash receipts for month 11680 Total cash payments for month 0

Calculation of cash balance according to the firm’s records:

Balance as at 1-Nov-15 (4085) OD
plus Cash receipts journal 11680
7595
less Cash payments journal 9290
Balance as at 30-Nov-15 (1695) OD

d Brunswick Catering Supplies: Bank reconciliation statement as at 30 Novmber 2015

$ $
Balance as per bank statement 985 CR
plus Deposits not credited 670
1655
less Unpresented cheques
Chq. No. Amount
493461 1000
493474 550
493475 1800 3350
Balance as per business records (1695) OD

e Comment on the cash position:

At quick glance at the bank statements may indicate that the cash position appears to be
in a much better state. The bank statements show that the overdraft has disappeared and
the firm now has a positive balance of $985. However, this does not reveal the true
situation. The business started October with an overdraft of $200 and this has deteriorated
to an overdrawn balance of $1695.Three cheques remain unpresented and when these
are presented the account will once again be in overdraft. The firm's cash position should
continue to be of concern to the owner of this business.

Permission is granted for this page to be printed by the purchasing institution. 12

Copyright Macmillan Education Australia 2011.