Waec Model Questions Vol1 2024 Financial Accounting Question 7

XYZ Ltd. keeps a cash book that shows a cash balance of ₦150,000 as at 31 March 2024. The bank statement for the same date shows a balance of ₦165,000. The following information is available: 1. Outstanding cheques at 31 March: ₦12,000 (Cheque No. 104), ₦5,500 (Cheque No. 105) and ₦3,000 (Cheque No. 106). 2. Deposits in transit at 31 March: ₦8,000 received on 30 March but not yet credited by the bank. 3. Bank service charge of ₦1,200 shown on the statement. 4. Interest earned on the bank balance of ₦800 shown on the statement. 5. A cheque of ₦4,500 received from a customer was recorded in the cash book as ₦45,000. 6. The bank incorrectly credited a cheque of ₦2,300 to XYZ Ltd.'s account that actually belongs to another customer. 7. A cheque of ₦6,000 received from a customer was returned unpaid because of insufficient funds. Using the above information, answer the following: a) Prepare a full bank reconciliation statement showing the adjusted cash book balance as at 31 March 2024. b) Explain the reason for each adjustment made in the reconciliation. c) State the amount of the error made by the bank and indicate whether it results in an overstatement or understatement of the bank balance.