Question

Question 3

The following is a summary of the cash book of Glow Sdn Bhd for May 2019:

Cash book(Bank column)
	RM		RM
Balance b/d	5,628	Payments	62,080
Receipts	60,292	Balance c/d	3840
	65,920		65,920

               

Upon investigation, the following were discovered:

1. A cheque drawn for RM188 has been entered in error as a receipt in the cash book
2. Bank charges of RM140 shown on the bank statement have not been entered in the cash book.
3. A cheque for RM72 has been returned by the bank marked ‘refer to drawer’, but it has not been written back in the cash book.
4. An error has occurred in the opening balance in the cash book where the opening balance should have been carried down as RM5,880.
5. Three cheques paid to suppliers for RM856, RM1,480 and RM120 have not yet been presented to the bank.
6. The last page of the paying in book shows a deposit of RM6,168 that has not yet been credited by the bank.

Required:

1. Show the adjustments that should be made in the cash book.

                                                                                                                        (6 marks)

2. Prepare a bank reconciliation statement at 31 May 2019.

                                                                                                                        (6 marks)

                                                                                                                       

                                                                                                                        (Total:12 Marks)

Question 3 The following is a summary of the cash book of Glow Sdn Bhd for May 2019: 1 RM Casti book(Bank solume) RM Balance bid 5.628 Payments Receipts 60.292 Balance od 65,920 62,080 3840 65,920 Upon investigation, the following were discovered: i. A cheque drawn for RM188 has been entered in error as a receipt in the cash book ii. Bank charges of RM140 shown on the bank statement have not been entered in the cash book. A chaque for RM72 has been returned by the bank marked 'refer lo drawer, but it has not been written back in the cash book. An error has occurred in the opening balance in the cash book where the opening balance should have been carried down as RM5.880. Three cheques paid to suppliers for RM856, RM1.480 and RM120 have not yet been presented to the bank. vi. The last page of the paying in book shows a deposit of RM6,168 that has not yet been credited by the bank. Required: a) Show the adjustments that should be made in the cash book merks) b) Prepare a bank reconciliation statement at 31 May 2019. marks) (Total:12 Marks)

Answer 1

1) Adjusting entries in company's books are required to be recorded only for those transactions which would affect company's book balance. In other words, transactions that would affect bank records shall not to be recorded in firm's cash book. So, outstanding checks and deposits in transit are not recorded in adjusting entries. Balance b/d Receipts Adj. (iv) Rectify Cash book(Bank column) RM 5,628 Payments 60,292 Adj. (i) Rectify 252 Adj. (ii) Bank Charges Adj. (iii) Check Returned Balance c/d 66,172 RM 62,080 376 [188 x 2 --> To record actual payment & rectify incorrect deposit] 140 (For Adj. (iv), Error in opening balance is rectifiied --> 5,880 - 5,628 = 252] 72 [For Adj. (v) & (vi), no adjusting entries are required in cash book as entries for them were recorded already] 3,504 --> Adjusted cash book balance --> Balancing figure --> (6,628 + 60,292 + 252) - (62,080 + 376 + 140 + 72) = 3,504 66,172 GLOW SDN BHD Bank Reconciliation May 31, 2019 Cash balance per cash book Add: Checks outstanding 3,504 [As calculated in Part-1] 2,456 [856 + 1,480 + 120 (Ref: Entry-(v))] 5,960 6,168 (Ref: Entry-(vi)) -208 Less: Deposits in transit Cash balance as per bank NOTE: Negative cash balance as per bank indicates that the bank statement must show bank overdraft balance (debit balance) as at May 31, 2019.