Waec Model Questions Vol1 2020 Financial Accounting Question 6

The following cash transactions were recorded by ABC Services Ltd. for the month of March 2023. The business uses a two‑column cash book (cash and bank columns). | Date | Details | Cash Receipts (₦) | Cash Payments (₦) | Bank Receipts (₦) | Bank Payments (₦) | |------|-----------------------------|-------------------|-------------------|-------------------|-------------------| | 01/03| Opening balances | 50,000 | – | 120,000 | – | | 03/03| Cash sales | 85,000 | – | – | – | | 05/03| Paid rent (cash) | – | 20,000 | – | – | | 07/03| Received bank loan | – | – | – | 150,000 | | 10/03| Purchased equipment (cash) | – | 45,000 | – | – | | 12/03| Collected from debtors (bank) | – | – | 70,000 | – | | 15/03| Paid salaries (bank) | – | – | – | 60,000 | | 18/03| Cash purchase of inventory | 30,000 | – | – | – | | 20/03| Paid utilities (cash) | – | 12,000 | – | – | | 22/03| Deposited cash in bank | – | – | 40,000 | – | | 25/03| Received cash from customers| 55,000 | – | – | – | | 28/03| Paid supplier (bank) | – | – | – | 35,000 | | 30/03| Closing balances | – | – | – | – | Using the above information, answer the following: a) Prepare the cash book for March 2023 showing the cash and bank columns, and compute the closing cash balance and closing bank balance. b) The bank statement for March shows a closing balance of ₦ 215,000. Reconcile the bank column of the cash book with the bank statement, given that: - There are outstanding cheques amounting to ₦ 18,000. - Deposits in transit amounting to ₦ 12,000. - Bank charges of ₦ 2,000 not yet recorded in the cash book. Prepare a bank reconciliation statement. c) Explain why the cash book is considered a double‑entry book and state two advantages of maintaining a cash book.