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Hi sir,
This is the question where I faced issues
A bank reconciliation statement for Dallas at 30 June 20X5 is being prepared. The following
information is available:
(1) Bank charges of $2,340 have not been entered in the cash book.
(2) The bank statement shows a balance of $200 Dr.
(3) Unpresented cheques amount to $1,250.
(4) A direct debit of $250 has not been recorded in the ledger accounts.
(5) A bank error has resulted in a cheque for $97 being debited to Dallas’ account
instead of Dynasty’s account.
(6) Cheques received but not yet banked amounted to $890.
What will be the final balance in the cash book after all necessary adjustments?A $463 Dr
B $463 Cr
C $63 Cr
D $63 Dr
Answer provided is Bin the explanation I saw that they haven’t taken adjustment (1) and (4) I really don’t understand why these two adjustments are left out.
these adjustments are already recorded in the bank balance but not at cash balance so we need to make changes right like add back the bank charges and the direct debit to get the cash balance . since in BRS once we receive the bank balance we have to make all the necessary changes to it which has not been made to the cash a/c to convert it right ?
Items 1 and 4 will need entering in the cash account, but we do not know what the balance is in the cash account at the moment and so we cannot correct it.
However the bank reconciliation statement starts with the balance on the bank statement but after making the adjustments for unpresented cheques etc. it will end up with the same figure as the correct balance on the cash account.
If the question had given the current balance on the cash account then we would just adjust for items 1 and 4, but because we were not given the balance and instead were given the balance on the bank statement we need to adjust by the items that affect the bank statement.
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.
i understand sir,Many thanks for your great explanation ill be sure to rewatch your lectures 🙂
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