Bob Andy Music Mart received his bank statement for the month of December which showed an overdraft balance of 113,209. Being anxious of his cash situation he conducted an audit of his cash book which had a debit balance of $128,488.

This audit revealed the following:

a) Trade creditors totalling $21,010 have been paid by a bank transfer, but is not yet recorded in the cashbook

b) Cheque # 1763 dated December 20 for $31,084 in favour of Goofy has been correctly recorded in the bank statement, but was included in the cashbook as $30,184

c) Cheques paid according to the cashbook totalling $39,580 were not presented as yet for payment

d) Bank service charge of $16,956 and bank interest charge of $10,910 have been entered in the bank statement, but not yet entered in the cashbook

e) The bank statement showed that a cheque for $2,931 received from Red Rat and credited to the firm's account had been subsequently dishonoured

f) Cheque # 1771 for $1,510 has been recorded twice as a credit in the cashbook

g) Amounts received totalling $189,560 and recorded in the cashbook have not yet been included in the bank statement

h) A Standing order payment from General Degree for $40,520 has been credited in the bank statement but is not yet posted to the cashbook.

Required:

i. Update the cash book, showing all the necessary adjustments.(5 marks)

ii. Prepare a bank reconciliation statement as at 31 December 2019(5 marks)

 

Answer rating: 100% (QA)

i Updated Cash Book Date Description Debit Credit 1Dec2019 Balance bd 128488 2Dec2019 Trade creditor... View the full answer