Chapter 6: Errors and corrections to accounting records - Part 2

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?

• Deposits credited after date

• Direct debit shown on bank transaction report only

• Bank charges

• Bank error

• Cheque presented after date

Which two of the following statements about bank reconciliations are correct?

• In preparing a bank reconciliation, unpresented cheques must be deducted from the balance shown in the bank statement.

• A cheque from a customer paid into the bank but dishonoured must be corrected by making a debit entry in the cash at bank account.

• An error by the bank must be corrected by an entry in the cash at bank account.

• An overdraft is a debit balance on the bank statement.

• Bank charges that only appear on the bank statement must be debited to the cash at bank account.

Which three of the following differences between a company’s cash at bank account and its bank transaction report balance as at 30 November 20X3 would feature in the bank reconciliation?

• Cheques recorded and sent to suppliers before 30 November 20X3 but not yet presented for payment

• Omission by the bank of a cash lodgement made by the company on 26 November 20X3

• Bank charges

• Cheques paid in before 30 November 20X3 but not credited by the bank until 3 December 20X3

• A customer’s cheque recorded and paid in before 30 November 20X3 but dishonoured by the bank

In performing a bank reconciliation exercise, which two of the following require an entry in the cash at bank account?

• Cheque paid in, subsequently dishonoured on the bank transaction report

• Error by bank

• Bank charges

• Lodgements credited after date

• Outstanding cheques not yet presented

Which of the following statements about bank reconciliations are correct?

• All differences between the cash at bank account and the bank statement must be corrected by means of a journal entry.

• In preparing a bank reconciliation, payments received from credit customers before the period end but credited by the bank after the period end should reduce an overdrawn balance in the bank statement.

• Bank charges not yet entered in the cash at bank account should be dealt with by an adjustment to the balance per the bank statement.

• If a cheque received from a credit customer is dishonoured after date, a credit entry in the cash at bank account is required.

The debit balance in Omar plc’s cash at bank account at the year end is £42,510. The following items appear in the bank reconciliation at the year end. A cheque received from a customer for £2,470 was returned unpaid by the bank before the year end, but this has not been recorded in the cash at bank account. What was the bank balance shown by the bank statement?

• £37,700

• £47,320

• £35,230

• £32,760

The following information relates to a bank reconciliation. The balance in the cash at bank account before taking the items below into account was £8,970 overdrawn.

(1) Bank charges of £550 on the bank statement have not been entered in the cash at bank account.

(2) The bank has credited the account in error with £425 which belongs to another customer.

(3) Cheque payments totalling £3,275 have been entered in the cash at bank account but have not been presented for payment.

(4) Receipts totalling £5,380 have been correctly entered on the debit side of the cash at bank account but have not been paid in at the bank.

What was the overdrawn balance as shown by the bank statement?

• £6,990

• £10,650

• £11,200

• £11,625

On reviewing its cash at bank account and the transaction report downloaded from its electronic banking system, Probla plc discovers the following errors: (1) A cheque from a credit customer for £1,095 was recorded in trade receivables and cash at bank account as £1,509. (2) A cheque to a credit supplier for £89 was entered incorrectly in trade payables and the cash at bank account as £98. What is the journal entry to correct these errors?

• Debit Receivables £414, Credit Payables £9, Credit Cash £405

• Debit Cash £405, Debit Payables £9, Credit Receivables £414

• Debit Receivables £414, Debit Payables £9, Credit Cash £423

• Debit Cash £423, Credit Receivables £414, Credit Payables £9

Epsilon’s cash at bank account at 31 December 20X3 shows a balance of £565 overdrawn. On comparing this with the transaction report downloaded from the electronic banking system, the accountant discovers the following:

(1) A cheque for £57 drawn by Epsilon on 29 December 20X3 has not yet been presented for payment.

(2) A cheque for £92 from a customer, which was paid into the bank on 24 December 20X3, has been dishonoured on 31 December 20X3.

The correct balance in Epsilon’s cash at bank account as at 31 December 20X3 is:

• £473 debit

• £714 credit

• £657 credit

• £473 credit