Cash book balance is le 2,500, cheques in transit-le 600, Bank charges not recorded le 100. Prepare the bank…

Question

Cash book balance is le 2,500, cheques in transit-le 600, Bank charges not recorded le 100. Prepare the bank reconciliation statement. Determine the need for adjusted cash book balance. List two causes of discrepancies between bank and cash book.

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Here's the solution to question 1.b:

b)

Prepare the Bank Reconciliation Statement.
We will adjust the cash book balance to find the true cash position, and then show how the bank statement balance would reconcile to the same figure.
$\textbf{Bank Reconciliation Statement as at [Date]}$ $\begin{align*} \text{Balance as per Cash Book} && \text{Le } 2,500 \\ \text{Less: Bank Charges (not recorded in cash book)} && (\text{Le } 100) \\ \text{Adjusted Cash Book Balance} && \underline{\underline{\textbf{Le } 2,400}} \\ \\ \text{Balance as per Bank Statement (implied)} && \text{Le } 2,600 \\ \text{Add: Deposits in Transit} && \text{Le } 600 \\ \text{Less: Cheques issued but not presented} && \underline{(\text{Le } 800)} \\ \text{Adjusted Bank Statement Balance} && \underline{\underline{\textbf{Le } 2,400}} \end{align*}$
Determine the adjusted cash book balance.
Based on the reconciliation statement above, the adjusted cash book balance is:
$\text{Adjusted Cash Book Balance} = \boxed{\textbf{Le } 2,400}$
Explain the need for bank reconciliation.
Bank reconciliation is necessary to identify and explain any differences between the cash balance in the company's cash book and the balance shown on the bank statement. It helps to ensure the accuracy of cash records, detect errors or fraud, and determine the true cash position of the business.
List two causes of discrepancies between bank and cash book.
- Timing Differences: These occur when transactions are recorded by one party (either the company or the bank) but not yet by the other. Examples include deposits in transit (company recorded, bank not yet) and unpresented cheques (company recorded, bank not yet cleared).
- Errors: Mistakes made by either the company in its cash book or by the bank in its statement can lead to discrepancies. This could include incorrect amounts, omissions, or double entries.

Cash book balance is le 2,500, cheques in transit-le 600, Bank charges not recorded le 100. Prepare the bank reconciliation statement. Determine the need for adjusted cash book balance. List two causes of discrepancies between bank and cash book.

Answer

Step-by-step solution

Prepare the Bank Reconciliation Statement.

Determine the adjusted cash book balance.

Explain the need for bank reconciliation.

List two causes of discrepancies between bank and cash book.

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