ICAEW CFAB ACCOUNTING (AG) - ch. 6

A Co’s trade receivables ledger account comprises: sales £125,000, cash received £50,000, and early settlement discounts taken unexpectedly by customers totalling £2,000. 

The balance carried down is £95,000. 

What was the opening balance at the beginning of the period?

• £20,000 debit

• £18,000 debit

• £22,000 debit

• £22,000 credit

A bank statement shows a balance of £1,200 in credit. An examination of the accounting records shows a £500 cheque paid in per the cash at bank account but not yet on the bank statement and £1,250 card payment made to a supplier which is not yet on the bank statement. 

In addition, the cash at bank account shows the owner’s correct calculation of savings interest of £50 which should have been received, but which is not on the statement. 

What is the balance per the cash at bank account?

• £500 in hand

• £500 overdrawn

• £1,900 in hand

• £1,900 overdrawn

Answer explanation

Alpha received a statement from its credit supplier Beta, showing a balance to be paid of £8,950. Alpha’s payables ledger for Beta shows a balance due to Beta of £4,140.

Investigation reveals the following:

1. A bank transfer made to Beta of £4,080 shortly before year end has not been recorded by Beta.

2. Alpha has not adjusted the payables ledger for a £40 cash discount taken by Alpha but not allowed by Beta as payment was not made on time.

3. Goods costing £380 returned by Alpha have not been recorded by Beta.

Requirement : What discrepancy remains between Alpha’s and Beta’s records after accounting for these items?

• £1,070

• £310

• £9,310

• £390

Answer explanation

(8,950 – 4,080 – 380) – (4,140 + 40) = 310

At 31 January 20X8, Randall’s cash at bank account balance for its current account showed a credit balance of £150 which did not agree with the bank statement balance. 

In performing the reconciliation the following points come to light. It was also discovered that the bank had debited Randall’s account with a cheque for £400 in error. This should have been debited to Hopkirk’s account.

Not recorded in the cash at bank account

Bank charges £36

Transfer from savings account to current account £500

Not recorded on the bank statement

Unpresented cheques £116

Uncleared lodgements £630

Requirement : What was the original balance on the bank statement?

• £200 DR

• £1,600 CR

• £600 DR

• £428 DR

Answer explanation

Balance per corrected cash book $314

Add unpresented cheques $116

Less outstanding lodgements ($630)

Less error by bank* ($400)

Balance per bank statement= ($600)

Bank reconciliation for Worth Ltd at 31 December 20Y1 is in course of preparation. In the light of the information given below, compute the final balance shown by the cash at bank account.

1. Overdrawn balance per bank statement is £1,019.

2. An amount of £250 credited in the bank statement under a standing order arrangement has not been entered in the cash at bank account.

3. Payments to a supplier made by debit card entered in the cash at bank account but not yet included in the bank statement total £2,467.

4. Bank charges of £1,875 debited by the bank have not been entered in the cash at bank account.

5. Cash and cheques received and entered but not credited in the bank statement total £4,986.

6. An uncorrected bank error has resulted in a cheque for £397 debited to Worth’s account in error.

Requirement : The final balance shown by the cash at bank account, after making all necessary corrections, should be:

• £1,897 DR

• £6,831 DR

• £3,141 DR

• £228 DR

When performing a reconciliation between the bank transaction report and the cash at bank account, which two of the following would require an entry in the cash at bank account?

• Direct debit shown on bank transaction report only

• Bank charges

• Cheque presented after date

• Deposits credited after date

• Bank error

A payment in respect of rent has been correctly recorded in the cash at bank account but the expense has been recorded as a distribution cost rather than administrative expense. 

What type of error is this?

• A transposition error

• An error of commission

• An error of principle

• A compensating error

Ash incorrectly recorded a purchase of tyres for their personal use as purchases of the business.

What type of error is this?

• An error of commission

• A transposition error

• A compensating error

• An error of principle

Charlie purchased office chairs at a cost of £745. They incorrectly recorded this transaction as £475.

What type of error is this?

• An error of principle

• A compensating error

• A transposition error

• An error of commission

Harps has a cash at bank account balance of £380 credit on 23 July 20X7. Harps extracts a transaction report from the electronic banking system that day which shows bank interest of £34 was credited to the account, a direct debit for £240 in respect of telephone expenses was withdrawn and a cheque for £50, which has already been recorded in the nominal ledger accounts, was presented. 

What is the adjusted cash at bank account balance after taking account of these transactions?

• £124 credit

• £174 credit

• £586 credit

• £636 credit

Answer explanation

380+240-34