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Hi. Just some clarification required below:
“It was also discovered that the bank had debited the company’s account with a cheque for $400 in error”. What was the original balance on the bank statement
My understanding is a debit on the bank account is a payment out of the account, i.e a cash deduction. However, the worked answer to this problem highlighted deducting the $400 in the bank reconciliation.
I am thinking since the $400 was taken out in error, it would be added back to arrive at the original balance.
Can you assist in clarifying my confusion?
Thanks
I can’t help without seeing the whole question. If it is a past exam question or a question in the BPP Revision Kit, then tell me which question and I will check.
(For example, you have not said what the current balance on the bank statement is – maybe it is overdrawn?)
This is the question:
On 31 January 20X8 a company’s cash book showed a credit balance of $150 on its current account which did not agree with the bank statement balance. In performing the reconciliation the following points came to light.
Not recorded in the cash book:
Bank charges $36
Transfer from deposit account to current account $500Not recorded on the bank statement:
Unpresented cheques $116
Outstanding lodgements $630It was also discovered that the bank had debited the company’s account with a cheque for $400 in error.
What was the original balance on the bank statement?
Answer:
Balance per corrected cash book $314
Add unpresented cheques $116
Less outstanding lodgements ($630)
Less error by bank* ($400)
Balance per bank statement= ($600)
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