The cash book of XYZ Ltd shows a closing cash balance of $£12{,}500$ on 31 March. The bank statement for the same date shows a balance of $£13{,}200$. The following information is available:
- Outstanding checks total $£1{,}200$ (three checks of $£400$, $£500$ and $£300$).
- Deposits in transit total $£800$.
- The bank charged a service fee of $£50$ that has not been recorded in the cash book.
- A deposit of $£600$ was incorrectly credited by the bank; the cheque actually bounced (NSF).
- Bank interest of $£30$ has not been recorded in the cash book.

(a) Reconcile the bank statement to the cash book and state the adjusted cash book balance.
(b) Identify any bank error and state its amount.

Question

The cash book of XYZ Ltd shows a closing cash balance of $£12{,}500$ on 31 March. The bank statement for the same date shows a balance of $£13{,}200$. The following information is available:
- Outstanding checks total $£1{,}200$ (three checks of $£400$, $£500$ and $£300$).
- Deposits in transit total $£800$.
- The bank charged a service fee of $£50$ that has not been recorded in the cash book.
- A deposit of $£600$ was incorrectly credited by the bank; the cheque actually bounced (NSF).
- Bank interest of $£30$ has not been recorded in the cash book.

(a) Reconcile the bank statement to the cash book and state the adjusted cash book balance.
(b) Identify any bank error and state its amount.

Accepted Answer

Adjusted cash book balance = £12,180. The bank error is a £320 credit to the cash book that must be reversed.

Gce Model Questions Vol1 2024 Financial Accounting Question 45

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