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An entity has prepared its bank reconciliation at 31 March 20×4 taking the following information into account:
$
$
Outstanding lodgements:5000
Unpresented cheques 2,800
Bank charges included in the bank statement but not recorded in the cash at bank ledger account were $125.
The adjusted cash book balance per the bank reconciliation was a debit balance of $1,060.
What was the balance as shown on the bank statement at 31 March 20X4?
A $1,140 debit
B $1,140 credit
C $1,265 debit
D $1,265 credit
According to be the answer is b but the kit shows the answer is a. If we do calculation 1060+2800-5000=1140
So if we write uncredited lodgements on credit side won’t be the balance that we got would be creditWe take the balance on the bank statement and reduce it by the unpresented cheques and increase it by the outstanding lodgements in order to arrive at the cash book balance.
Here we know the cash book balance and therefore to arrive at the balance on the bank statement we need to add back the unpresented cheques and subtract the outstanding lodgements.
This ends up giving an overdraft in the bank statement of 1140 and since in the bank a credit balance means we have cash and a debit balance means we are overdrawn, in this case we are overdrawn and therefore it will be a debit balance on the bank statement.
Have you not watched my free lectures where it is explained how and why the bank statement shows debits and credits in the opposite way to the cash account?
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