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Your firm’s cash book show a credit balance of $1240 at 30 April 20X9. On comparison with the bank statement, you determine that there are unpresented cheques totalling $450, and a receipt of $140 which has not yet passed through the bank account. The bank statement shows bank charges of $75 which have not been entered in the cash book.
What was the balance on the bank statement?
A $1005 Overdrawn (Correct answer in the kit)
B 930 O/d
C $1475 in credit
D $1550 in credit
I don’t understand how A is the correct answer because my kaplan kit barely explains it. the answer is a cash ledger where 1240 and 75 are on credit side with the total balance being 1315
The only error in the cash account is that the bank charges have not been entered.
So the correct balance is 1240 + 75 = $1315 overdrawn.
However the bank statement will not show $1315 overdrawn because of the unpresented cheques and the unrecorded receipt. So you need to work backwards to find the balance showing on the bank statement, which will be 1315 – 450 + 140 = $1005 overdrawn.
Have you watched my free lectures on bank reconciliations? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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