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Business Accounting Tutorial 5
Business Accounting Tutorial 5
c) Three reasons why balances in cash book and bank statement may
be unequal are:
1) Timing Differences: Transactions recorded in one record may occur
at different times than when they are recorded in the other record. For
example, a cheque issued on June 30th may not be presented for
payment until July, resulting in a difference between the cash book
and bank statement balances.
2) Errors: Mistakes in recording transactions or reconciling the
accounts can lead to differences between the cash book and bank
statement balances.
3) Bank Charges and Interest: Bank charges or interest earned may be
recorded by the bank but not yet recorded in the cash book, leading to
a difference in balances.
To prepare the updated Cash Book, we need to reconcile the Cash Book (Bank
Column) and the Bank Statement.
Step 1: Compare the opening balances
The opening balance in the Cash Book is RM2,840, and in the Bank Statement, it is
also RM2,840. Since they match, no adjustment is needed.
IntheBankStatement:
-MZBhd (Dividend)creditofRM50 on Feb25.
Interest on deposit credit of RM30onFeb26.
ServicechargesdebitofRM10onFeb28.
ChequeBookpurchaseddebitofRM5onFeb28.
We needtoaddtheRM50dividendcreditandRM30interestcredittoourbalance.
WealsoneedtosubtracttheRM10servicechargesdebitandRM5chequebookpurchasedde
bitfromourbalance.
Starting with the balance brought down from June 1st, we add any
deposits made into the bank account. In this case, there are no
deposits mentioned.
Next, we deduct any checks issued or payments made from the bank
account. We refer to the checks mentioned in both the cash book and
bank statement and record them accordingly.
Finally, we compare the ending balance in both records. If they are not
equal, we adjust for any additional transactions that may have been
recorded by either party but not yet reflected in one of the records.
Items to be added:
- Deposits not yet credited by bank: None mentioned.
- Errors or omissions on Bank Statement: None mentioned.
- Interest earned but not recorded in Cash Book: None mentioned.
- Bank charges deducted by Bank but not recorded in Cash Book: None
mentioned.
Items to be deducted:
- Outstanding checks: None mentioned.
- Deposits recorded in Cash Book but not yet credited by Bank: None
mentioned.
- Errors or omissions on Cash Book: None mentioned.
c) Three reasons why the balance in the cash book and bank
statement may be unequal are:
1. Timing differences: Transactions may have been recorded in one
record but not yet reflected in the other due to processing delays or
timing discrepancies.
2. Errors or omissions: Mistakes could have been made while recording
transactions in either the cash book or bank
a) The necessary adjustments in the cash book of Ghina are as follows:
1. Cheques issued amounting to RM9,300 were still outstanding and did not go
through the bank until July 2019.
- Deduct RM9,300 from the cash book balance.
2. A customer received a cash discount of 5% on his account of RM500 but paid the
company by cheque on 15 June 2019. The bookkeeper entered the gross amount in
the cash book.
- Deduct RM25 (5% of RM500) from the cash book balance.
3. A deposit of RM1,000 paid into the bank on 29 June 2019 had not yet appeared on
the bank statement.
- Add RM1,000 to the cash book balance.
5. The electricity bill payment by direct debit for June was not recorded in the cash
book.
- Deduct RM100 from the cash book balance.
6. A cheque for RM90 had been lodged on 20 June but was returned as out-of-date
and a new cheque has been requested.
- Deduct RM90 from the cash book balance.
7. Two customers paid amounts directly into the bank account by standing order on
28 June, but no entries were made in
the cashbook.
- Add both amounts (RM950 +RM1,300 =RM2,250) tothe Cash Book Balance
9.AstandingordertoacharityforRM135hadnotbeenenteredintheCashBook
–DeductRM135fromtheCashBookBalance
10.On15JunethemanagerhadgiventhebookkeeperachequeforRM500tolodgeintohisper
sonalaccount.Bymistakethebookkeeperlodgedittothebusinessaccountandrecordediti
ntheCashBook
–DeductRM500fromtheCashBookBalance
The corrected balance in the cash book at 30 June 2019 is RM4,850 (RM5,900 -
RM9,300 - RM25 + RM1,000 - RM150 - RM100 - RM90 +RM2,250-RM760-RM135-
RM500).
b) The bank reconciliation at that date showing the balance per the bank statement
is as
Q6.
In this case, the balance as per the adjusted cash book is RM988.70.
After deducting these amounts from our total, we get a final balance of
RM2,498.90 as per the bank statement.
Therefore, based on this information and calculations provided in your
answer sheet or question prompt, the correct answer for preparing a
bank reconciliation statement as at 31 May 2019 is: