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Your firm’s bank statement at 31 October 20X8 shows abalance of $13,400. You subsequently discover that thebank has dishonoured a customer’s cheque for $300and has charged bank charges of $50, neither of whichis recorded in your cash book. There are unpresentedcheques totalling $2,400. Amounts paid in, but not yetcredited by the bank, amount to $1,000. You furtherdiscover that an automatic receipt from a customer of $195 has been recorded as a credit in your cash book. Your cash book balance, prior to correcting the errors andomissions, was:A $11,455B $11,960C $12,000D $12,155
Sir I am completely lost with the workings, how do they get the answer as 11,960????
THey havent specified whether the bank balance of 13400 is a Debit or credit??
If you are simply told that there is a balance at the bank of 13,400 then it means they have an asset of 13,400 (i.e. not overdrawn) and it is therefore a credit balance on the bank statement.
Therefore the correct balance in the cash account should be 13,400 – 2,400 + 1,000 = 12,000 (a debit balance in the cash account).This would be after correcting the errors, and so the balance before correction the errors would be 12,000 + 300 + 50 – (2 x 195) = 11960
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