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Question 16.5 BPP kit
The following relates to a bank reconciliation:
1 The bank balance in the cashbook before taking the items below into account was $8970
2 Bank charges of $550 on the bank statement have not been entered in the cashbook
3 The bank has credited the account in error with $425 which belongs to another customer
4 Cheques payments totaling $3275 have been entered in the cash book but have not been presented for payments
5 Cheques totaling $5380 have been correctly entered on the debit side of the cashbook but have not been paid for in the bank.What was the balance as shown by the bank statement before taking the above items into account?
A$9520 overdrawn
B$11200 overdrawn
C$9520 underdrawn
D$1120 underdrawnThe correct answer is D could you explain how to get that answer?
Thanks 🙂What you have not written is that the balance in the cash book of 8970 is overdrawn !!!!
Also, the answer in the BPP Kit is not D at all – I have the kit in front of me and the answer is B !!
First you need to correct the balance in the cash account by adjusting for item 2.
So the correct balance on the cash account is 8970 + 550 = 9520 overdrawn.Then you need to ‘work backwards’ to find out what the current balance is on the bank statement, adjusting for the other items.
So tha current balance on the bank statement is 9520 – 425 – 3275 + 5380 = 11200 overdrawn (There is no such term as ‘underdrawn!!)
I do suggest that you watch my free lectures on bank reconciliations. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
My apologies! I had a typo and looked at the wrong answer in the book!
Thank you very much once again for explaining the answer.
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