Question

b) The following is a summary of the cash book of High Ltd for March 21019: GH GH Opening balance b/d 4,120 Payments 46.560 Receipts 45,320 Closing balance eld 2880 49.440 49.440 On the investigation you discover that at 31 March 2019: i. The last page of the paying-in books a deposit of GH¢1,904 which has not yet been credited by the bank Two cheques paid to suppliers for GH¢642 and GH¢1.200 have not yet been presented to the bank. iii. Dividends received of the GH¢189 are shown on the bank statement but not entered in the cash boo Bank charges of GH¢105 shown on the bank statement have not been entered in the cash book. A cheque for GH¢54 has been returned by the bank marked 'refer to drawer but it has not been written back in the cash book. vi. A cheque drawn for GH¢141 has been entered in error as a receipt in the cash book. vii. The bank has debited a cheque for GH¢216 error to the company's account. You are required to: 1. Show the adjustments that should be made in the cash book. ii. Prepare a bank reconciliation statement at 31 March 2019. [4marks 16marks

Answer 1

2,880 HIGH LTD Bank Reconciliation March 31, 2019 Cash balance per cash book Add: Dividends received by bank but not recorded Checks outstanding 'Refer to Drawer' collection check returned 189 1,842 54 2,085 4,965 105 Less: Bank charges debited but not recorded Deposits in transit Error in recording a pay check Wrong debit posted by bank Cash balance as per bank 1,904 282 216 [141 x 2 --> To record actual payment & rectify incorrect deposit] 2,507 2,458

b) Ajusting Entries: NOTE: Credit Date Mar. 31 189 Account Titles and Explanation Debit Cash 189 Dividend Revenue (To record dividend receipt) Cash 54 Accounts Receivable (To record check returned by bank 'Refer to Drawer') Bank charges expense Cash (To record bank charges debited by bank) Credit cash account by 282 Adjusting entries in company's books are required to be recorded only for those transactions that would affect company's book balance. In other words, those transactions that would affect bank records shall not to be recorded in company's books of accounts. So, outstanding checks and deposits in transit are not recorded in adjusting entries. Mar. 31 Mar. 31 105 105 Mar. 31 (To rectify error of recording payment as collection)