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i) One of the ways of managing cash is to maintain more than one back account.
Explain how the company can use different bank accounts as a tool for cash managementII) The accountant for mobile city has just received the July 31, 2018, bank statement from zanaco, which is summarized below.
Dr Cr Payments (K) Receipts (K) Balance Balance July 1 K 74,952
Deposits during July 257,600 332,552 Receipts from a credit customer 8,320 340,872 Cheques Cleared during August 276,000 64,872 Bank Service charges 160 64,712
Balance July 31 64,712
The general ledger Cash account contained the following entries for the month of July 2018. Dr Cr Balance July 1 K80, 400 Receipts during July 280,000 Payments in July K283, 224
Deposits in transit at July 31 are K32, 880, and Cheques outstanding at July 31 totaled 12,400. The assistant accountant improperly entered one Cheques in the books as K1, 172 instead of K 1,316.It was correctly cleared by the bank during the month of July.This cheques was for stationery expense;
Required. (a) Prepare bank reconciliation as at dated July 31, 2018
(b) Prepare any journal entries necessary to make the books correct and complete..At the moment the balance on the company’s cash account is:
Sorry, I can’t get it to reconcile. My attempt is:
Starting with the cash book: 80,400 + 280,000 – 283224 = 77,176
Correcting for the mis-entered cheque will change this by 1172- 1316 ie -114 and the balance would then be 77,032.
Presumably the bank charges of 160 are not yet reflected in the cash account so when they are the balance would be 76,872.
The bank account balance does not yet reflect the cash in transit of 32880 and the unpresented cheques of 12,400. Adjusting for these will bring the bank’s view of the account to:
64712 + 32880 – 12400 = 85192
There is certainly one error in the question where it says ‘Cheques Cleared during August 276,000’. That should presumably be cleared during July.
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